Bizz news

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Nissan operation 'a great opportunity'

2008-12-22T13:20:00.005-08:00

Pittsburgh businessman David Scaife has expanded his car sales activities in the region, recently taking over operations of a Nissan dealership near Johnstown in Cambria County.

Scaife, the owner of Auto Palace Porche on Baum Boulevard in North Oakland, is operating the Nissan franchise on Scalp Avenue in Richland under the name Auto Palace Nissan. He purchased the franchise and started operations Sept. 1, said Aaron Comstock, general manager of his dealership operations.

"We saw this as a great opportunity," Comstock said. The previous franchisee for the Nissan dealership was Team Motors, a business that owns Chevrolet and Kia dealerships in the Johnstown area.

The franchise Internet site lists just under 100 vehicles for sale, including 2008 and 2009 models, ranging in price from $15,000-plus Nissan Versa sedans and hatchbacks to Nissan SUVs running at more than $40,000.

State records show the business is owned by DNS Nissan LLC, on Baum, with Scaife shown as manager. A purchase price was not disclosed.

Despite the economic downturn and its impact on domestic automakers Chrysler, General Motors and Ford, Scaife's team is optimistic about prospects for both the new venture and its existing business in Pittsburgh, Comstock said.

Japanese automakers are in far better financial state than their American counterparts, but they are getting battered in the shrinking market.

In November, when auto sales plunged 37 percent to their worst level in more than 26 years, Toyota's sank 34 percent, Nissan's were down 42 percent and Honda Motor Co.'s fell 32 percent.

In Western Pennsylvania, Nissan has been among the Japanese brands gaining market share -- with a 1.1 percent increase over the last nine months, according to figures from the Greater Pittsburgh Automobile Dealers Association, which includes some dealers in the Johnstown area.

The brand is projected to increase new car and light truck registrations by 7.1 percent this year, the association said in its 2008 third-quarter Pittsburgh Auto Outlook report.

"The economy is causing everyone concern, and there is a downturn in auto sales across the board," Comstock said. "But we're looking forward to making it through the downturn and moving forward."

Plans are to continue to operate the Richland Nissan dealership at its location under a lease agreement until sometime next year when Scaife hopes to have a brand new complex built at a nearby site.

Comstock did not disclose the location because the purchase of the property isn't completed and plans still are being developed.

"We want to build a state-of-the-art facility. We think it will be exciting and will create a lot of customer traffic in that area," he said.

While Scaife expanded his business in Johnstown, in November he finished renovation of his existing dealership on Baum Boulevard. Comstock declined to disclose the cost of the renovation, which was completed Thanksgiving week, but said the investment was "substantial."

"We completely gutted and remodeled the showroom, and added drive-in service, he said. "It was a complete renovation."

Scaife, who is the son of Tribune-Review owner Richard M. Scaife, has owned the Baum Boulevard site since 2000 and operated the Porche franchise since 2002, said Comstock. Based there is his Spyker of Pittsburgh, a business that sells hand-built luxury vehicles.

Also located there is Scaife's Race Car Museum, a private collection of about 15 classic cars, including such makes as Porsche, Jaguar and Ferrari, that is not open to the public.

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Government officials worked to keep strip mill in Valley

2008-12-22T13:20:00.003-08:00

Landing the $1.2 billion hot strip mill at ATI-Allegheny Ludlum's Brackenridge Works required the cooperation of state and local elected officials, who took key steps to set the stage for the project.

It happened with a sense of urgency as ATI considered putting the new mill in Kentucky, which was offering an incentive package that included cheap electricity, or on its property in Midland, Beaver County, which already had the state designation of a Keystone Opportunity Zone.

Either scenario posed the likelihood of Ludlum eventually leaving the Valley.

State legislators, including state Rep. Frank Dermody of Oakmont, state Rep. Jeff Pyle of Ford City, and state Sen. Sean Logan of Monroeville, went to work pushing legislation on two fronts. One was passing a bill that allowed businesses such as Ludlum, which uses huge amounts of electricity, to cut their long-term deal with power companies and thus lower costs.

A second bill allowed for expansion of the Keystone Opportunity Zones (KOZ) to include the ATI-Ludlum project. It will provide 10 years worth of tax abatement from the counties, municipalities and school districts on new construction related to economic development. In return, ATI-Ludlum will pledge to invest at least $750 million into new development and create or preserve 1,400 jobs, which happens to be the normal size of the work force at the Brackenridge Works.

Once the legislation was approved, it was the local officials' turn to step up and keep the relationship with Ludlum from going on the rocks.

Brackenridge Council, Harrison Township Commissioners and the Highlands School Board approved the tax abatements for the KOZ.

"It's a no-brainer," George Conroy, Harrison commissioners' chairman said at the time. "Basically, it means getting that or not getting anything because, if they don't build it here, I think they'll close Brackenridge."

Brackenridge Council was called to go beyond that.

The Brackenridge Works belongs to that borough in name only. The mill is located in Harrison, but on its western end it abuts Mile Lock Lane in Brackenridge. ATI officials told the borough it would need to expand the mill property's footprint to fit the new project. To do that, Brackenridge Council vacated Mile Lock Lane and will reconfigure the street to allow the mill to move over about 20 feet.

After some behind-the-scenes wrangling with company officials, borough council approved the action on Sept. 9.

On Sept. 17, ATI announced that the hot strip mill would be built at Brackenridge.

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Expectations blossom with Brackenridge strip mill

2008-12-22T13:20:00.001-08:00

The ATI-Allegheny Ludlum Corporation's relationship with the Alle-Kiski Valley, like many marriages, isn't a match made in heaven but has weathered stormy times to forge something of value.

Looking back through the stainless steel producer's history marked by high profits and low profits, strikes, acquisitions, environmental problems, corporate restructuring and challenges from subsidized foreign steel producers, Ludlum and the Valley have stayed true to each other for each other's benefit.

There is no better example of that than the September decision by Ludlum's parent company, Allegheny Technologies Inc., to invest between $1.2 billion and $1.5 billion in a new hot strip mill at its Brackenridge Works.

"I think it is a long-term thing," said Dennis Davin, Allegheny County's economic development director. "What it does for us in Allegheny County and Western Pennsylvania is solidify that manufacturing presence for the future.

"Companies don't do this kind of thing lightly. They don't do it unless it is the right business model. These guys were convinced that this is the right place to do it, the right work force and it really keeps 1,400 manufacturing jobs going in the Valley."

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Nursing-home ratings called inconsistent

2008-12-20T15:27:00.003-08:00

Area nursing home owners say the federal government's new rating system is a good first step but, by itself, could mislead the public.

The Centers for Medicare and Medicaid Services on Thursday released its first-ever nursing home rating system, which gives each home a rating of from one to five stars. About 22 percent of the nation's nearly 16,000 nursing homes received one star, the lowest rating, and 12 percent received five stars, the top grade.

In an eight-county region of Western Pennsylvania, 133 nursing homes were rated.

Stars were given based on criteria such as staffing and how well the nursing homes fared in state inspections.

Owners of two or more nursing homes particularly were perplexed with the ratings. Some of their properties received a single star, while others were awarded five stars.

"We own three care communities and operate another two in the region, and all operate under the same standards of care," said Pat Kornick, spokeswoman for Presbyterian SeniorCare, based in Oakmont.

One of Presbyterian SeniorCare's facilities -- the Willows of Presbyterian SeniorCare in Oakmont -- received a single star. But Longwood at Oakmont in Verona garnered a five-star rating.

"We fully support quality-of-care measurements, but we also believe that quality of life is important -- and this star system doesn't address quality of life," Kornick said. "To us, the truest indication of how we're doing is the daily report card that we get from our residents and their families."

In Allegheny County, 25 percent -- or 16 or 64 nursing homes -- received single-star ratings, or much-below-average performance. Two of the poorest-performing facilities within the county are owned by the University of Pittsburgh Medical Center -- Canterbury Place in Lawrenceville and UPMC Heritage Place in Squirrel Hill.

"Some of the data in this rating system is both older and unclear, with questionable methodology that may cause fear in the public," said UPMC spokeswoman Gloria Kreps. "Our concern is that this may also cause unnecessary fear among our patients and their families."

For-profit and nonprofit facilities are included in the federal rating, as were government-owned nursing homes.

Allegheny County's four John J. Kane centers received varied ratings -- a five-star rating for the nursing home in Scott, three stars for the Kanes in Ross and Glen Hazel, and two stars for the McKeesport facility.

"It's too early to make a determination as to how the criteria plays into such a complex area," said Dennis Blondo, executive director of the Kane facilities. "It's very difficult to understand how you can place a rating on something as personal as where somebody lives. There is much more that goes into quality of life for a nursing-home resident.

"Having said that, we're very pleased at the five-star ranking for our Scott facility, and I feel all our centers deserve a five-star ranking," Blondo added.

In Westmoreland County, three of 22 nursing homes were awarded one star, while two received five stars. Of Washington County's 12 nursing homes, three were given a single star, while no facilities garnered a five-star rating. In Butler County, one of 13 nursing homes received a single-star rating, while three were given five stars.

Two of Fayette County's eight nursing homes earned one-star ratings, while one facility garnered a five-star grade. Two of Beaver County's seven facilities received single stars, while none garnered five stars. None of Indiana County's five homes or Greene County's two nursing facilities were given one or five stars.

Kerry Weems, acting administrator for the Centers for Medicare and Medicaid Services in Washington, D.C., said the agency's ratings were based on data already on its Web site and were aimed at making it easier for patients and families to choose a nursing home. He said it can be difficult for people to understand all the aspects of an inspection.

Lyn Manns, administrator at Sycamore Creek Nursing Center in Kennedy, said the data used in determining her facility's one-star rating were old. Mann said the nursing home's owner, Cleveland-based Sabre Healthcare Group, has been making improvements -- the latest of which is a new name. Effective Friday, the facility now is known as Caring Heights Community Care and Rehabilitation Center.

"We invite people to come out, take a look at what we're doing," said Manns.

Even five-star facilities are somewhat cautious in acknowledging the top-notch rating.

"We really weren't surprised at this. We know our staff and leadership team does a great job, and this ranking took notice of that," said Chris Newport, administrator at Covenant at South Hills in Mt. Lebanon, a five-star awardee.

"We're ecstatic we were awarded five stars, we work hard at what we do, but all nursing homes strive to do the best they can do," said Sister Bernice Fiedor, administrator at St. Anne Home in Greensburg.

Home sales in region decline 6.3 percent

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McCandless project to include offices, big-box retail, hotel

2008-12-20T15:27:00.001-08:00

Construction of the first phase of the $120 million McCandless Crossing in McCandless will include a big box retailer, a 123-room hotel, 200,000 square feet of office space and a restaurant.

Details of the development, to span the east and west sides of McKnight Road near LaRoche College, were outlined by Jeffrey A. Mills, of Pepper Hamilton LLP, legal adviser to developer AdVenture Development LLC of McCandless, whose president is Kevin Dougherty.

"About 100,000 square feet of offices will be for a medical facility to accommodate physicians from nearby UPMC Passavant, with the remainder general office uses," Mills said.

The initial phase of the 130-acre complex, to be built on the west side of McKnight, could be completed by the summer of 2010, and the second and final phase, on the east side of McKnight, will be started either that year or in 2011, he said.

The overall development will consist of 1 million square feet and include a town center, an entertainment area with a cinema and possibly residential units.

Mills spoke before the Redevelopment Authority of Allegheny County, which on Thursday authorized the county's Department of Economic Development to seek up to a $10 million grant from the state's infrastructure improvement program.

The grant would finance debt payments on the costs of roads and other infrastructure at the site.

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Stocks open higher after automaker bailout news

2008-12-19T14:46:00.007-08:00

NEW YORK -- Wall Street has opened higher as investors cheered the government's pledge to lend as much as $17.4 billion to the U.S. automaking industry.

The decision to help the struggling companies comes after a $14 billion bailout for Detroit automakers failed to emerge from the Senate last week.

The companies' cash flows have been dwindling to a slow trickle due to the weak economy and credit crunch. The White House will let automakers draw $13.4 billion in short-term financing, and another $4 billion will be added later.

Investors have also veen worried about broader job market ramifications of a bankruptcy of an automaker like General Motors Corp. or Chrysler LLC.

In the first minutes of trading, the Dow was up 107 points to the 8,712 level.

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Flabeg expansion plans spurs infrastructure upgrades

2008-12-19T14:46:00.005-08:00

Flabeg Corp.'s plan to build a $33 million manufacturing facility in Findlay has prompted Allegheny County to seek up to $1.5 million from the state for infrastructure improvements.

Flabeg, which designs and engineers high-tech optical products and mirrors, said it will build a 150,000-square-foot plant and a 50,000-square-foot office annex on land leased from the Buncher Co. in the Clinton Commerce Park.

The company said the initial building will house a business unit by 2010 that will create about 300 jobs. Flabeg will continue its Brackenridge plant, where 200 are employed.

Flabeg is in line to receive a $9 million aid package from the state and county. The Redevelopment Authority of Allegheny County on Thursday approved a request for the state grant.

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5-county region's home sales plunge 20%

2008-12-19T14:46:00.003-08:00

Sales of existing homes in the five-county Pittsburgh region declined 19.6 percent in November compared to the same month last year, marking the 20th consecutive month of falling sales.

There were 1,810 home sales in November versus 2,250 a year ago, according to RealStats, a South Side-based real estate information company.

For the 11-month period of January through November, sales are down 16.3 percent this year compared to the same period last year, the company said.

Total sales this year through November were 24,220 while the total for 2007 was 28,925.

"It should be noted that there were two fewer business days in November compared to a year ago and, factoring that in, the number of sales are off roughly 11 percent," said Daniel A. Murrer, RealStats vice president.

Not surprised by the decline is Tom Hosack, president of Northwood Realty Services.

"With all the economic distress and bad news, people are not buying houses but shopping for Christmas. The shopping malls and restaurants are packed, and November, along with December, are traditionally slow months for house sales," he said.

Hosack said the market may turn around next year, perhaps not immediately in January, but by the third quarter, thanks to government actions to stimulate the economy.

"We knew November would be down in house sales, based on the number of houses under sales agreements during October," said Howard (Hoddy) Hanna III, chief executive officer of Hanna Holdings Inc.

RealStat said the average price of homes sold in November declined about 2.5 percent, compared with last year. The average sale price was $146,121 last month compared to $149,830 a year ago.

Median sales prices also declined to $115,000 in November versus $116,750 a year ago, down 1.5 percent. The median price is the point at which half the homes sold for more and half for less.

The average sale prices in Westmoreland County increased 21.7 percent -- $155,362 last month on 285 sales compared to $127,690 on 341 sales a year ago. Prices decreased in all other counties, with Washington down 12.8 percent, Beaver down 11 percent, Allegheny down 5.3 percent and Butler down 0.3 percent.

RealStats said the average price of a new home sold in November was up 2.1 percent, at $311,171 compared to $304,722 a year ago. November new home sales declined 32.5 percent, with 166 compared to 246 a year ago.

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State prescription cards offer average 30% savings

2008-12-19T14:46:00.001-08:00

HARRISBURG -- Pennsylvania today became the 22nd state where people can get a free prescription drug card that will provide an average savings of 30 percent on medicine.

Funded by pharmaceutical companies and pharmacies, the discounts will help 800,000 Pennsylvanians without health insurance in a difficult economy, said Thomas J. Shaw, program director for the Pennsylvania Drug Card.

Anyone can get the card, he said.

"There are no restrictions to membership, no income requirements, no age limit and no applications to fill out," Shaw said.

The card, available at www.padrugcard.com, offers discounts of up to 75 percent.

"We encourage all residents to take advantage of the opportunity to help offset the rising prices of prescription drugs purchased in Pennsylvania," said former Gov. Mark Schweiker, now CEO of the Greater Philadelphia Chamber of Commerce.

Schweiker backed the plan Wednesday in Philadelphia. Shaw made an announcement Thursday in the state Capitol Rotunda.

California, New Jersey, Florida, Georgia, Colorado and Virginia are among states offering the card, according to Shaw.

All drugs are included, he said.

"There is medicine manufactured that is not sold," said William H. Gutches, the program's pharmacy business development director, when asked why drug companies would do this.

That doesn't mean companies are selling drugs near or over the expiration dates, Gutches and Shaw stressed.

"On the face of it, it looks great," said Chuck Ardo, a spokesman for Gov. Ed Rendell.

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LeNature CEO Podlucky accused of $110M bait-and-switch

2008-12-18T23:35:00.007-08:00

It was a skim that would have made the Mafia proud.

Two men running a business out of a house in North Carolina allegedly handled millions of dollars for former LeNature's CEO Gregory Podlucky and helped him skim $110 million in financing that Podlucky used to enrich himself by building a mansion and purchasing $30 million worth of gems and jewelry.

The scheme, detailed in a lawsuit filed in U.S. District Court in Pittsburgh against Podlucky, former company officers, family, friends and investment bankers, could serve as the blueprint for money laundering, bank, wire and mail fraud charges being considered by a federal grand jury in Pittsburgh.

The funds were part of more than $500 million allegedly looted by Podlucky as part of a fraud that kept the failing company afloat through forgery, deceit and questionable loans.

Evidence uncovered by forensic auditors has since been turned over to the U.S. Attorney's Office, postal inspectors and the Internal Revenue Service for use in the criminal probe, according to bankruptcy court records that detail the investigation.

Also named as defendants are Podlucky's brother, Jonathan, who was the company's COO; David Getzik of Washington, Pa., the former CFO; Robert Lynn of Ligonier, vice president; and Drew Murin, formerly of Derry, who is a friend of Podlucky's and served as a company consultant.

None of the defendants would comment on the allegations.

Here's how the scheme worked, according to Trustee Marc Kirschner's filing, which is seeking more than $1.5 billion in damages.

Podlucky hired The Pollinger Co., of Charlotte, N.C., to act as an intermediary in arranging the financing and purchase of bottling equipment that Podlucky wanted to use to expand his Latrobe plant and a sprawling plant he built in Arizona.

Podlucky and owners Donald and Paul Pollinger used a simple bait-and-switch to run the scam.

The Pollingers ordered an expensive line of equipment, then switched to cheaper machinery after the financing was in place. The company leasing the equipment ended up paying Pollinger Co. more than the Pollingers had to pay the company manufacturing the equipment, according to the suit.

When LeNature's auditors in 2006 wanted to confirm that Pollinger had the equipment deposits in a bank, the Pollingers confirmed that they held more than $200 million in deposits for Podlucky. The money was supposed to be transferred to a German company making the equipment.

As a result, "tens of millions of dollars" were funneled to Podlucky, according to Kirschner.

The suit alleges the Pollingers also helped Podlucky obtain financing for machinery that did not exist.

Kirschner said no one raised alarms when it was discovered that Pollinger was a small, two-man operation with little or no assets or credit rating. More importantly, no one bothered to check where the money was deposited, he said.

In each instance, the leasing company paid too much in financing and Pollinger sent the excess to Podlucky. In 2003 and 2004, more than $8.1 million in excess financing was transferred to Podlucky, according to the lawsuit.

The lawsuit also details Wachovia Bank's role.

Wachovia Bank and its affiliates, Wachovia Capital Markets and Wachovia Securities, are named as defendants in the lawsuit. Wachovia, which arranged a total of $600 million in financing for LeNature's, knew the company was teetering financially yet it continued to provide LeNature's "with a steady stream of capital" by issuing more debt, according to Kirschner.

Kirschner said LeNature's should have failed financially as early as 2002 but Wachovia's steady stream of money kept the company in business, piling up even more debt, until late 2006.

Despite Wachovia's own misgivings about LeNature's financial affairs, the bank kept loaning the company more money.

Using internal company e-mails, Kirschner shows that Wachovia's investment bankers were at odds with their own analysts who had serious doubts about LeNature's and Podlucky.

One Wachovia analyst questioned why LeNature's earnings did not match its reported growth projections since its line of water and juice products were not being carried by the major stores. Its products were disappearing from shelves at places like Wal-Mart, Target, Pathmark and Kroger's.

Another analyst in Wachovia's food and beverage division asked how LeNature's could be making money by selling its product for 99 cents.

Finally, it got to the point where Wachovia analysts said LeNature's financial information was "frankly worthless" even though brokers had put out a "buy rating" on a series of junk bonds for the company.

Wachovia was able to reduce its liability to nothing by selling its debt to other financial institutions and hedge funds who never were told about LeNature's financial problems.

In the process, the bank earned more than $7.1 million in fees "for a few days' work." Wachovia's actions in that instance also are the subject of a lawsuit in federal court in Pittsburgh.

Pat Huddleston, the former chief of enforcement for the Securities and Exchange Commission, said corporate corruption "is all about the money."

"There is always a battle between the compliance department and people who make money for the investment banking firms -- the investment bankers," said Huddleston, who now operates Investors Watchdog, a Web site in Atlanta that tracks financial fraud.

"Voices get drowned out by investment banking fees, which are pretty hefty. Some officials just don't have the courage to insist that people take a harder look at these things out of fear for their job," Huddleston said.

"On one hand, you have someone raising red flags. On the other, you have someone saying, 'I can make $20 million on this deal.' "

He said creating bogus financial records and forging documents are nothing new in corporate America. Corrupt businessmen are willing to go to any length to conceal fraud.

He said he tracked a recent scam involving a company official who creating a non-existent accounting firm so it could issue fictitious financial opinions on behalf of the company to hide the businessman's misdeeds.

"Truth is stranger than fiction," he said.

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California firm pays $34 million for O'Hara software company

2008-12-18T23:35:00.005-08:00

A California software company said Wednesday it will pay $34 million to buy Algor Inc. of O'Hara, which makes computer-aided engineering software used to design products ranging from mobile phones to oil pipelines.

Autodesk Inc. of San Rafael, Calif., said acquiring Algor will strengthen its own digital prototyping software, by adding advanced simulation functions.

Michael Bussler, Algor's president and founder, said his company has "enjoyed a longstanding partnership with Autodesk, and the combination of our proven technologies will be an exciting new chapter for our customers worldwide."

Autodesk, with more than 7,000 employees and $2 billion in annual revenue, said it intends to integrate Algor into its manufacturing solutions business unit, while continuing to sell and develop Algor's core product line.

Algor, founded in 1976 and incorporated in 1980, has 75 employees and the acquisition's effect on its local operations is uncertain.

Autodesk spokeswoman Clay Helm said because the agreement was just signed, "it would be premature to talk of facilities plans, long-term." The acquisition could close by late January.

Customers of Algor, according to its Web site, include the GM Powertrain unit of General Motors Corp., Hewlett-Packard Co. and Solar Power Industries Inc., of Belle Vernon.

Autodesk software is used in a wide range of products. The company announced this week that "Mortal Kombat vs. DC Universe" and many other top video games in stores this holiday season were built with its products.

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Pittsburgh home prices hold despite nationwide slump

2008-12-18T23:35:00.003-08:00

Despite the nationwide slowdown in housing starts and sales, the Pittsburgh region is one of the brighter spots in Pennsylvania and the nation, home builders said Wednesday.

"Although production of new housing is down 50 percent from the peak construction years of 2003 and 2004, the region is one of the few markets not seeing a decline in overall pricing levels," said Frank Thompson, president of Sweetwater Builders Inc. of Cranberry.

Thompson spoke during a conference call Wednesday, hosted by the Pennsylvania Builders Association, that included Ken Kurtz, president of Ken Kurtz Builders in Jermyn, Lackawanna County, and Dave Seiders, consultant to the National Association of Home Builders.

Thompson said new housing prices have not declined in the region and the inventory of unsold new houses is slowly decreasing. But that has not spiked sales because buyers are concerned about whether they can sell their current home, job security and whether new housing prices will decline, he said.

In October, the median new home price in the five-county Pittsburgh region was $273,607, up slightly from $267,050 in October 2007, according to RealStats, a South Side-based real estate information service. The median price is the point at which half the homes sold for more and half for less.

Housing starts have held up in the region until recently, said Jeff Burd, president of Tall Timber Group, which monitors the local construction industry.

"It has only been the last two months -- October and November -- that the numbers have really dived," Burd said. There were 115 starts in October and 81 in November, he said. He had forecast 1,700 to 1,800 starts this year.

In October, there were 236 sales of new homes and townhomes, down from 284 last year, according to RealStats. Money spent on new homes in the five-county area dropped 15.5 percent from $85.7 million to $72.4 million with the sharpest declines in Beaver and Westmoreland counties where the activity was off by more than 50 percent. Allegheny County had the only increase in sales during October. Also included were Butler and Washington counties.

Nationally, housing starts fell 18.9 percent from October to November -- what some experts are calling the worst month since record-keeping began in 1947 -- the Commerce Department reported Tuesday.

"Some builders are able to weather the current economic crisis but others have been devastated and either have gone into home improvement or temporarily suspended operations," said Thompson, a former president of the Builders Association of Metropolitan Pittsburgh. "Several customers I have been working with for awhile agreed to buy a house, but have also asked construction be delayed until the spring, in hope that prices will decline," he said.

Kurtz said the picture was worse in the eastern part of the state.

A builder of two to five homes annually, Kurtz said he had five solid buyers recently and four of the five decided to delay construction start until spring, citing the economy and worry that their investment will maintain its value.

Housing starts are down two-thirds from the peak years, he said.

"Our message to Congress is to fix housing first. That's a key component to turning the economy around," Seiders said.

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Longtime Oakland restaurant Duranti's closing Friday

2008-12-18T23:35:00.001-08:00

Duranti's Restaurant in the Park Plaza condominiums in Oakland will close at 9 p.m. Friday.

An investor working to acquire the space plans to lease it to the University of Pittsburgh. The university's Office of Institutional Advancement signed a 10-year lease, starting in May, at an initial cost of $492,678 to occupy 20,965 square fee in the building.

Theodora Duranti, the restaurant owner, declined to identify the investor but said she hopes to reopen Duranti's at a new location.

Duranti's has been in the building at 128 N. Craig St., since 1979. A Stouffer's restaurant was there previously.

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Gas-drilling permit fees in Pa. set to skyrocket

2008-12-17T13:29:00.003-08:00

The Pennsylvania Environmental Quality Board on Tuesday approved rules that would sharply increase permitting fees for companies drilling into the natural gas-rich Marcellus Shale formation.

For the average Marcellus Shale horizontal well that stretches 10,000 feet down and then across the shale formation, the permit cost next spring would jump to $2,600. That's up from the $100 fee, regardless of depth, that was adopted in 1984.

"Due to technological advances in drilling and rising natural gas prices, gas exploration in the commonwealth has increased significantly with 40,000 new drilling permits anticipated during the next three years," said John Hanger, acting secretary for the state Department of Environmental Protection.

DEP estimates the new fee structure will bring in an additional $3 million a year for the department. Proceeds will be used to hire 37 DEP staff to review Marcellus Shale permit applications and monitor drilling activities statewide.

Sixteen of the new employees are to be based in Pittsburgh, DEP spokesman Tom Rathbun said yesterday.

"We'll be hiring oil and natural gas inspectors, water quality specialists, environmental engineers, technical staff like geologists and office permitting staff," Rathbun said. Oil and natural gas inspectors will be paid between $41,017 and $62,338, the DEP said.

Trade associations and independent oil and natural gas exploration-production companies doing business in the Marcellus formation generally were supportive of the fee increase.

"The additional fees will help the DEP expand its resources to match increased activity in the Marcellus," said Matt Pitzarella, spokesman for Fort Worth-based Range Resources Corp., with an office in Cecil in Washington County. "Ultimately, this should help foster Marcellus development, which will add good-paying jobs in Pennsylvania and boost the state's economy."

Steve Rhoads, president of the Pennsylvania Oil & Gas Association, said his organization generally supports increased fees -- those pertaining strictly to Marcellus Shale drilling, and others for different types of oil and gas drilling programs.

The 20-member Environmental Quality Board, chaired by the DEP secretary, is an independent board that decides on all DEP regulations.

Rathbun said now that the board has approved the increase, it goes to the Independent Regulatory Review Commission, which considers whether all agency regulations are in the public's interest. Finally, the state attorney general must approve the increase.

Natural gas in Marcellus Shale can create revenue, jobs

Shakeup in the Oil Ranks

Gas, Gas Everywhere

Oil, gas drilling booming in state, study says

National City OKs settlement for shareholder lawsuit

2008-12-17T13:29:00.001-08:00

National City Corp., the Cleveland-based bank being acquired by PNC Financial Services Group Inc., agreed to release more data and pay $1.2 million in legal fees to settle lawsuits challenging the fairness of the deal.

In one of eight Delaware Chancery Court lawsuits, shareholder Arthur Klein alleged Oct. 27 that National City directors were duty-bound to get a higher price. A hearing to block the transaction had been scheduled for yesterday.

"Counsel for the parties have concluded that a settlement" on the claims "is fair, reasonable and adequate and in the best interests" of National City stockholders, lawyers said in court papers filed in Wilmington Dec. 12.

Pittsburgh-based PNC said Oct. 24 it would buy National City, Ohio's largest bank, for $5.2 billion to create the eighth-largest U.S. bank by assets, after receiving $7.7 billion in funding from the U.S. Treasury.

Under the buyout agreement, National City investors will receive 0.0392 share of PNC common stock for each of their shares, according to court papers. National City shareholders will vote on the deal Dec. 23.

In a memorandum of understanding filed with the court, National City officials denied wrongdoing and agreed to pay the legal fees and expenses for plaintiffs' lawyers.

They also disclosed information about the buyout process, including a planned $25 million transaction fee to be paid by National City for work by Goldman Sachs Group Inc. and $56 million paid by PNC to Citigroup affiliates related to the merger.

The settlement terms must be presented to Judge William B. Chandler III for approval at a later hearing.

The buyout plan won approval from the U.S. Federal Reserve yesterday and may close by the end of the year.

National City joined Wachovia Corp. and Washington Mutual Inc. in takeovers after losses tied to subprime-mortgage loans. National City was once among the nation's top 10 subprime lenders. Its stock price has fallen 88 percent this year.

National City rose 20 cents to $1.93 at 4 p.m. in New York Stock Exchange composite trading. Pittsburgh-based PNC rose $3.20, or 7 percent, to $49.20.

Lawsuits filed to stop National City sale

2 National City shareholders file lawsuits over sale

Bankruptcy sales hurt business for other retailers

2008-12-17T13:28:00.003-08:00

Brian Koerber and Jim Perez are the kind of shoppers bankrupt retailers love and solvent chains these days seek to entice.

Both shoppers walked out of Steve & Barry's discount clothing store at Century III Mall this week with bags of deals, courtesy of the Port Washington, N.Y., chain's going-out-of-business sale.

"It absolutely impacts where I'm shopping, with a sale like this," said Koerber, 33, of South Park. "You can't beat the deals. For $20, I got two pairs of jeans and three T-shirts."

With a week left until Christmas, retailers are doing all they can in an ailing economy to entice consumers with half-off or buy-one-get-one offers. But with bankrupt retailers such as Steve & Barry's, Circuit City, Linens 'n Things and Whitehall Jewelers hoping to dump as much merchandise as quickly as possible this season, solvent stores have an additional challenge, experts say.

"The bankruptcies are impacting other retailers tremendously," said Howard Davidowitz, chairman of retail consultant/investment bank Davidowitz & Associates Inc. of New York.

"Look at Bed Bath & Beyond. It's really being hurt by Linens 'n Things' bankruptcy, but the impact is for the short-term. Next year, Linens 'n Things will be gone."

Shoppers are waiting to make purchases, particularly when dealing with bankrupt retailers. They know that as the time nears for the doors to close forever, the markdown percentages increase.

"This is my third time shopping (the liquidation sale) at Linens 'n Things," said Angie Bedilion of Greensburg, as she entered the store Tuesday at Greengate Centre in Hempfield.

"I came here with my Mom because I was interested in a chair cushion, but it was only 10 percent off. I waited and finally bought it for half off, which I felt was a good price." Bedilion was back yesterday to check out some some exercise equipment.

While retail bankruptcies aren't unique, so many store chains selling off all of their inventory weeks or even days before year's end is somewhat out-of-the-ordinary, experts said.

The economic downturn has caused many consumers to pull back on spending, and for some retailers on the edge, even the prospect of increased holiday revenues couldn't fend off going-out-of-business sales. No fewer than 15 major retail chains filed for bankruptcy in the year's third quarter alone, including Circuit City and Linens 'n Things.

"The liquidation sales definitely are taking consumers away from solvent retailers," said George Whalen, president of Retail Management Consultants of San Marcos, Calif. "Linens 'n Things definitely is impacting Bed Bath & Beyond's sales, and Circuit City is impacting Best Buy."

The latest major retailer to seek U.S. Bankruptcy Court protection and hang huge going-out-of-business signs is KB Toys. The company is in its second trip to bankruptcy in four years.

KB Toys, which operates some 460 stores, has said it will try to find a buyer for its wholesale distribution unit as it conducts going-out-of-business sales.

Carol Dailey of Munhall wasn't aware KB Toys was closing until she got to the Century III store this week, saw the signs and enjoyed the 30 percent markdown.

"I didn't know they were closing until I got here, but I found some really good deals," Dailey said.

KB Toys, which started in 1922 as a family-owned business, previously filed for bankruptcy protection in 2004 and emerged one year later after selling itself to Prentice Capital Management Inc.

Bankruptcy sales notwithstanding, the overall tenor this holiday shopping season is, in a word, "horrendous," Davidowitz said. "We'll close 8,000 stores this year and 12,000 stores next year," he said. "Business is terrible."

The longtime retail watcher sees no quick solutions to the downturn and subsequent bankruptcy filings. "We have exploding consumer debt and exploding unemployment," Davidowitz said. "The consumer never has been in this much debt before."

Both Whalen and Davidowitz believe a number of other retailers will be hoisting liquidation sale signs after totaling their holiday sales.

"We'll see a significant number of retailers going out of business in February and March," Whalen said.

Bankrupt Retailers: Pushed to the Brink

A Very Anxious Christmas for Toys ‘R’ Us

One bank must take 50 National City branches

2008-12-17T13:28:00.001-08:00

The government told PNC Financial Services Group to sell 50 National City Bank branches in Allegheny County as one block to one buyer, a move that could introduce a big new competitor to Pittsburgh, industry sources said Tuesday.

The federal mandate is part of the Justice Department's order on Thursday that PNC divest 61 branches throughout Western Pennsylvania before it may acquire National City Corp.

"All of the Pittsburgh divestitures have to go together. All of the (50) branches must go to the same buyer," said PNC spokesman Fred Solomon, confirming details of the order.

The 50 National City branches represent $3.35 billion in deposits in Allegheny County. The other 11 branches represent $750 million in deposits.

Analysts said a 50-branch bunch would cost somewhere between $160 million and $335 million -- too rich for a smaller bank to handle, but not for other, bigger banks outside this region.

Candidates include M&T Bank of Buffalo and Fifth Third Bank of Cincinnati, said Bob Wagner, senior vice president at Ferris Baker Watts' office in Mt. Lebanon.

M&T operates more than 700 branches in seven states, including 227 branches in Pennsylvania, plus Washington, D.C., and has more than $65 billion in assets. Spokesman Kent Wissinger said the bank would not comment on industry speculation.

Fifth Third already has a dozen branches in Allegheny County and "intends to continue to build out our presence in Western Pennsylvania," said James "Jay" Ferguson III, Western Pennsylvania president. But he declined to say whether Fifth Third, which has nearly 1,300 branches and $116 billion in assets, would want to buy all 50 branches.

Other candidates might include investment banks Morgan Stanley and Goldman Sachs, which recently created holding companies that could accommodate commercial banking franchises, said Wagner.

"I don't think you'll see any of the super-community banks in our region swallowing 50 branches at once," said Wagner.

"It appears the Justice Department is trying to bring another good-sized bank into the region. It would have to be a fairly big bank to buy that many branches," said Robert McCarthy Jr., CEO of Parkvale Financial Corp., which has less than $1.9 billion in assets.

The government required PNC to spin off branches to "resolve competitive concerns raised in the proposed merger," the agency said in a statement without elaborating.

"We understand (the mandate) but are disappointed by it," said McCarthy. Parkvale would otherwise be interested in buying some of the National City branches, he said.

PNC received approval from the Federal Reserve on Monday to acquire Cleveland-based National City in a $5.6 billion deal announced Oct. 24. The only remaining step is for each bank's shareholders to approve the deal in votes scheduled for Tuesday.

The merger will make PNC the nation's eighth-largest bank by assets ($288.5 billion), fourth-largest by branches (2,747) and fifth-largest by deposits ($180 billion).

A single buyer could purchase the remaining 11 branches in Erie, Meadville, Titusville and Warren, said Solomon. PNC expects to strike sales agreements, or even one deal for all 61 branches, around the time the National City acquisition is completed around Dec. 31, he said.

It was not clear yesterday what would happen if PNC were not able to sell the 50 Allegheny County branches in one transaction, said Solomon. The Justice Department could not be reached for further comment.

PNC must integrate National City, sell branches, realign work force

Feds tell PNC to sell 61 National City branches

Japanese hurt by auto woes

2008-12-16T16:51:00.009-08:00

TOKYO -- Japan's automakers aren't celebrating the troubles of their U.S. rivals, believing that what's bad for the industry in America is bad for carmakers in Japan, too.

In recent years, the Japanese have expanded in the United States, making the world's biggest auto market a cornerstone of their growth strategy. By growing more American, however, they have become such a part of the U.S. industrial landscape that the collapse of any of Detroit's Big Three would be a blow to the Japanese manufacturers.

"The damage to our business is certain to be tremendous," Toyota Motor Corp. spokesman Hideaki Homma told The Associated Press on Monday. "The conditions for the U.S. auto market are extremely tough right now, and any additional negative is sure to make things worse."

One reason is that Japanese carmakers in the United States share many of the same parts suppliers with General Motors Corp., Ford Motor Co. and Chrysler LLC. If a Detroit automaker were to collapse, suppliers would likely follow in a damaging chain reaction.

More broadly, the crisis could lead to huge job losses and further weaken consumer spending, especially for big-ticket items like automobiles. Together, the Big Three automakers employ 239,000 workers in the United States. Counting other businesses that depend on the automakers, economists estimate that 2.5 million jobs would be lost if all three went out of business.

"Whether it is the impact on consumer confidence or the impact on the suppliers that we all share, having one or more of the major automakers in severe distress has consequences for the entire industry," said Simon Sproule, corporate vice president of global communications at Nissan Motor Co., Japan's third-biggest carmaker.

Among the major U.S. suppliers are Delphi Corp., Bosch Auto Parts and TRW Automotive.

Dan Irvin, spokesman for Mitsubishi Motors North America, said the Japanese automaker is "on the sidelines" on the specifics of the bailout proposals, but some assistance for the U.S. industry is likely needed.

Mitsubishi has one factory in the nation, in Normal, Ill., that employs nearly 1,600 people. Irvin said the plant does not share any parts suppliers with the Big Three.

"We would say that these are extraordinary economic times and the auto industry is critical to the American economy," Irvin said. "So in an extraordinary situation, some kind of extraordinary help for these major players in the auto industry is probably appropriate."

Fred Standish, a spokesman for Nissan's U.S. arm, offered support in principle for federal aid.

"What we hope comes out of all of this is a strong and vibrant U.S. auto industry, and so we would support efforts that we think would result in that," he said. "As for what those things are individually, we have to wait and see what Congress or the president ... come up with."

Jeffrey Smith, spokesman for U.S. operations for Honda, Japan's No. 2 automaker, said the company "encourages initiatives that are essential to maintain the short and long-term stability and viability of the auto industry."

A possible advantage from a collapse of the U.S. auto industry could come only many years later -- perhaps in a decade -- when Japanese manufacturers would compete against weaker rivals, especially if they further exploit their lead in green technology with hybrids or electric vehicles, said Koji Endo, an analyst with Credit Suisse in Tokyo.

$14B auto bailout collapses in Senate

Automakers Rev Up for a Bailout, Too

Gas, electricity shut-offs soar in state

2008-12-16T16:51:00.007-08:00

Gas and electricity shut-offs have soared since passage of a 2004 law that made it easier for utilities to stop service to nonpaying customers, but the law has not universally delivered the improved bottom lines that the companies sought.

A report issued Monday by the state Public Utility Commission said considerably more households faced a potentially dangerous situation heading into last winter than in the years before the law passed.

Termination rates are at record highs, with statistics in the report showing that electricity and gas shut-offs rose by more than 43 percent from 2004-07. Locally, Allegheny Power, Duquesne Light, Penn Power, Columbia Gas of Pennsylvania and Equitable Gas reported terminations rose by 70 percent to almost 220 percent, with Penn Power reporting the highest figure. Dominion Peoples Gas reported terminations were down 12.4 percent.

The number of disconnected customers who were reconnected to service rose substantially, more than 77 percent from 2004 to 2007.

At the same time, many more households are taking part in assistance programs that are supported by customers who pay their bills. Those programs have grown by more than 50 percent to $330 million, or about $45 a year per residential gas or electric customer.

The law was enacted with the support of gas and electric utilities, and has been criticized by consumer advocates because of what they said was the potential to harm low-income utility customers. Consumer advocates criticized the law because it passed in a lame-duck legislative session without public hearings.

The law required the utility commission to issue the report, the second of five, on its effectiveness.

The utility commission made no recommendations on how to change the law, but did encourage the Legislature to put more state taxpayer dollars into programs that help low-income households pay utility bills.

"Financial support is necessary because the declining economy is creating a 'new poor' as diminishing purchasing power for consumers combines with higher utility costs," the report said.

It warned that thousands more customers will find their utility bills unaffordable in the next two years upon the expiration of decade-old, state-imposed electricity rate caps that have shielded more than 80 percent of the state's customers from being billed for the true price of the power they use.

Columbia Gas bills to increase $8 month

GM Cuts Costs to the Bone

Price of natural gas dips

Wind: The Power. The Promise. The Business

Jobless rate drains state's benefits pot

2008-12-16T16:51:00.005-08:00

HARRISBURG -- Pennsylvania is among 30 states that risk running out of money to pay unemployment benefits, according to an organization of state administrators who oversee unemployment insurance laws.

"The economic climate is a really painful one," Ingrid Evans, a spokeswoman for the National Association of State Workforce Agencies, said Monday.

Chuck Ardo, a spokesman for Gov. Ed Rendell, said the Unemployment Compensation Fund won't be threatened before spring.

There will be enough left in the trust fund "for several months' worth of benefits" by the end of December, said Barry Ciccocioppo, another Rendell aide.

Pennsylvania this year has paid out more than $2.8 billion in unemployment benefits, up from $2 billion last year, an increase of 42 percent, according to the state Department of Labor and Industry.

Barney Oursler, co-coordinator of the Homestead-based Mon Valley Unemployed Committee, said the trust fund drying up would exacerbate the effects of the recession.

"If the unemployment checks run out, then it's even a much bigger disaster," Oursler said.

When that happens, the Legislature usually steps in and tries to find new sources to replenish the fund.

"Then they struggle over whether to put it on the backs of companies or on regular people," Oursler said.

Options for replenishing the trust fund include raising the amount employers and employees pay into it, slashing the benefits and borrowing money, Ciccocioppo said.

When the fund ran low in 2004 and 2005, officials borrowed money from other state funds, Ciccocioppo said.

Indiana and Michigan are borrowing money from the federal government to keep paying benefits to their residents who have applied for unemployment assistance, Evans said.

Pennsylvania's unemployment rate jumped 1.4 percentage points this year to 5.8 percent, which is still below the national rate of 6.7 percent.

Unemployment compensation claims have increased about 12 percent in the past year, state Labor and Industry figures show.

The most recent peak for Pennsylvania's trust fund was $1.8 billion. It will be about $1 billion by the end of December, according to the governor's office.

Pennsylvanians may collect up to 26 weeks of unemployment benefits and apply for 13 weeks of extended benefits from the federal government.

Sovereign Wealth Funds Taste Bitter Losses

State hiring workers to help the jobless

Collapsed Ponzi scheme hits high and low

2008-12-16T16:51:00.003-08:00

In a Connecticut town, officials scrambled to get a handle on damage to pension funds held for its police officers and firefighters. A Massachusetts charity announced it was shutting down. In New York, a distinguished economist feared he had lost his $2.2 million nest egg.

Damage continued to ripple Monday from the widespread fraud allegedly engineered by storied Wall Street money manager Bernard Madoff, even as investigators worked to unravel the scheme's working and its reach.

While details remained sketchy, the sudden collapse of Madoff's firm began revealing an impact far beyond the world of the ultra-wealthy and well-connected who were the mainstay of his client base. And the firm's extensive dealings with charitable foundations and other groups suggests the fraud may take a toll in unexpected places.

"It's devastating to people and communities and lives," said Deborah Coltin, executive director of the Robert I. Lappin Charitable Foundation, a Salem, Mass., organization that sponsors Jewish educational program and is being forced to close its doors.

The 70-year-old Madoff, well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested Thursday in what prosecutors say was a $50 billion scheme to defraud investors. Some investors claim they've been wiped out, and it is thought many more are yet to come forward.

Late yesterday, a federal judge directed that proceedings to liquidate the assets of Bernard L. Madoff Investment Securities LLC be moved to bankruptcy court.

The biggest victims include international banking institutions HSBC Holdings PLC of Britain, Royal Bank of Scotland Group PLC and Man Group PLC, Spain's Grupo Santander SA, France's BNP Paribas and Japan's Nomura Holdings. All reported that they had fallen victim to Madoff's alleged Ponzi, or pyramid, scheme.

The victims who sunk cash into the veteran money manager's investment pool include real estate magnate Mortimer Zuckerman, and a charity of movie director Steven Spielberg. Irwin Kellner, a well-known economist for MarketWatch.com, filed a lawsuit Friday against Madoff in U.S. District Court in Long Island, seeking repayment of more than $2.2 million he invested with the money manager.

But the list of people and organizations allegedly taken by Madoff reached into the ranks of the little guy, too.

When officials in Fairfield, Conn., heard of Madoff's arrest, "it set off every bell," said Paul Hiller, the town's chief fiscal officer.

The town's employees board and police and fire board -- which cover 971 workers -- had $41.9 million invested with Madoff, said Paul Hiller, Fairfield's chief fiscal officer.

Town officials immediately notified their investment fund to liquidate. "At that point, it was too late," he said.

"We obviously didn't ask enough questions," Hiller said.

Without the Madoff funds, the town's pension funds remain safe, officials said, but the loss means they've lost their cushion.

Others, though, have no such comfort zone.

Officials at the New York-based JEHT Foundation, a nonprofit focused on juvenile justice and fair elections, said it was freezing all its grants and would shut down at the end of January. The group gets all its fundings from a couple, Jeanne and Kenneth Levy-Church, whose personal investments were managed by Madoff.

"The impact is really quite deep because we're talking about $25 (million) to $30 million in funding to organizations that are no longer going to be getting that money," Robert Crane, the president of the foundation, said. "So it's a very significant ripple effect."

Another New York nonprofit, the Philoctetes Center for the Multidisciplinary Study of the Imagination, may be forced to close, spokesman Adam Ludwig said.

In Palm Beach., Fla. -- a denizen of the very wealthy where Madoff found many investors -- news of his arrest continued to reverberate.

"Ever since Thursday, I've been getting these phone calls. Levi, I need your help," said jeweler Levi Touger, who had just returned to his office after seeing a yacht one customer wanted to use as collateral for a loan.

He said people seeking money were offering a variety of collateral, from four-carat diamonds to a Lamborghini.

"There are people who have been hurt by this and they need a quick fix and they need right now to send to their broker X amount of money," Touger said.

New Jersey Sen. Frank Lautenberg, one of the wealthiest members of the Senate, entrusted his family's charitable foundation to Madoff. Lautenberg's attorney, Michael Griffinger, said they weren't yet sure the extent of the foundation's losses, but that the bulk of its investments had been handled by Madoff.

Reports from Florida to Minnesota included profiles of ordinary investors who gave Madoff their money. Some had been friends with him for decades, others were able to invest because they were a friend of a friend. They told stories of losing everything from $40,000 to an entire nest egg worth well over $1 million.

They join a list of more powerful investors that have come forward, all worried about the extent of their losses. The roster of names include Steven Spielberg's charity the Wunderkinder Foundation, New York's Yeshiva University, former Philadelphia Eagles owner Norman Braman, New York Mets owner Fred Wilpon and J. Ezra Merkin, the chairman of GMAC Financial Services, among others.

Among those overseas confirming exposure yesterday, Banco Santander, the largest bank in the euro zone by market capitalization, said its clients have $3.07 billion invested with Madoff, mostly through a fund called Optimal Strategic US Equity.

HSBC, Britain's largest bank, said a "small number" of its institutional clients had a total of about $1 billion in Madoff funds.

Sovereign Wealth Funds Taste Bitter Losses

LeNature’s plundered for $500 million: lawsuit

BNY Mellon might have to absorb $313M in new costs

Libya terror settlement check deposits refused

CNX Gas well hits production record

2008-12-16T16:51:00.001-08:00

CNX Gas Corp. said this morning its first horizontal well in the Marcellus Shale region is producing 6.5 million cubic feet of natural gas per day -- a record for any well in the company's history.

The well in Greene County began flowing into the sales meter on Oct. 2, producing 1.2 million cubic feet a day and 4,000 pounds of backpressure.

Since then, backpressure on the well gradually was reduced, allowing the flow to increase to 4 million cubic feet.

On Friday, new surface equipment was installed that enabled the well to reach record production.

CNX is mostly owned by Cecil, Washington County-based Consol Energy Inc. The company is drilling its second vertical Marcellus well, and soon will hydraulically fracture its second and third horizontal gas wells, to allow gas to excape from the shale.

CNX also said this morning it is raising its 2008 production guidance by 1 billion cubic feet, to a total 75 billion cubic feet.

Gas, Gas Everywhere

Palin No Pushover on Pipeline Project

Exxon’s Production Falls as Profits Soar

Plant to process natural gas

Benefits touted for 3 projects

2008-12-15T14:02:00.005-08:00

The city is eyeing state support for three projects designed to improve public access to developing areas of the North Side, East End and Squirrel Hill.

At a meeting Tuesday, the Urban Redevelopment Authority's board will consider applications to PennDOT for $2.4 million, including $1 million to help build a key pedestrian bridge connecting East Liberty and Shadyside in the vicinity of the Whole Foods store that anchors the burgeoning EastSide commercial project

An additional $1.1 million would go for improvement to two North Side underpasses at Sandusky and Anderson streets.

Officials plan to seek $300,000 more to study transportation connections at the Summerset at Frick Park residential development, which spans the neighborhoods of Squirrel Hill and Swisshelm Park.

The 87-foot Eastside Pedestrian Bridge would span the East Busway to give shoppers quick access from Ellsworth Avenue in Shadyside to Eastside -- a $29 million Mosites Co. project that has attracted Starbucks, Borders and Eva Szabo Spa as well as Whole Foods to once-downtrodden East Liberty.

More recently, officials have disclosed plans for a new Target store to be built in the neighborhood.

Costs for the bridge are estimated at $2 million, including $1 million already allocated from the state's Hometown Streets program.

Improvements to North Shore underpasses will "enhance local networks connecting the North Side to Downtown and the entertainment complexes on the North Shore," the URA said.

The $3 million project would include improvements to the two railroad bridges abutments and concrete fascias, installation of sidewalks, curb, and roadway lighting, sidewalk canopies, landscaping, wall demolition and backfill.

The state planning grant for the Summerset at Frick Park development would be used to study transportation connections between the first two phases of the residential community and the planned third phase. Phase one is complete and phase two is under way.

A Big Delivery for Whole Foods

Focus Stock: Tough Times Favor Family Dollar Stores

Falling gasoline prices hurt small stations

2008-12-15T14:02:00.003-08:00

With gas prices tumbling to levels last seen in 2004, Scott Royer has grown accustomed to seeing drive-offs by customers once loyal to his family-owned service station in central Pennsylvania -- but not the kind that make him call the police.

In recent months customers pull in but see a lower price posted at a big station across the street and pull right back out.

Small independent service station owners say they can't keep pace with plunging gas prices. By the time they empty a storage tank of gas, prices have fallen so far that the amount they must charge to recoup the purchase price appears exorbitant compared with high-volume chains, they say.

"We can't fluctuate as much," said Royer, whose father started Royer's Gulf Service Station in Carlisle in the 1960s. "Sometimes I have to just drop (the price) and take the loss."

It can take Royer three weeks to sell his 8,500-gallon shipments. When gas prices fall below the wholesale price he paid, he either has to eat the difference or stay with his higher price and risk losing customers.

In just the past month, the national average retail price for a gallon of gasoline has fallen more than 55 cents.

"If the price is falling, it really hurts," said Louis Ferrara, who sells about 60,000 gallons a month at his Sunoco in South Philadelphia, compared with average station sales of 75,000 to 100,000 gallons a month.

Gas station chains and large-volume sellers like Costco can lower their gas prices and absorb losses more easily than smaller stations because they buy so much gas and have other business to fall back on, said Ralph Bombardiere, executive director of New York State Association of Service Stations and Repair Shops Inc.

Prices in the Pittsburgh market are ranging from about $1.69 to about $1.85 a gallon, said Donald Bowers, who manages petroleum products for Superior Petroleum Co. in Ross.

"The guys who are at $1.85 aren't selling very much gas. They are still trying to get rid of it at better margin or no profit at all," he said.

Bowers' company distributes gasoline to about two dozen independent stations in Western Pennsylvania, including BP, Citgo, Sunoco and Valero, which entered the market last year.

Pittsburgh area fuel prices tend to be 20 to 40 cents higher than in Ohio, "and that in turn, doesn't help these smaller dealers," he said

Ray Moore, owner of Ray Moore's R&S Service, a Gulf station in Swissvale, said he's making money thanks to declining gas prices.

"I am supplied by a distributor, and every day my price is set. So when I get a load of gasoline coming in, I know the first thing in the morning what the price will be," Moore said. "And in a down market, I can make money because my market will change faster than, say, most of your Sunoco dealers who are on a contract and their prices may change every four or five days."

Moore said he bought gasoline for about $1.55 a gallon and is selling it for about $1.79 per gallon, "so I'm working on 14.5-cent profit," he said.

"That's the worst margin I've had in the last two months. There have been days where I've been leading the way down on my prices and consequently stealing business from other stations that when there is an up market can take business off of me."

"As my prices go up real fast, theirs don't, so they can hold a lower price longer than I can. So I'm making up for the days when I was selling gas at 2- or 3-cent profit margin when the prices were heading up."

"For the last two months as prices have been heading down, I've been making money," Moore said.

Over the past 15 years, the total number of gas stations across the country has fallen amid stricter environmental regulations, according to Carl Boyett, president of the Society of Independent Gasoline Marketers of America. Credit card fees have made business tougher for small station owners.

In 1994, the United States had 202,878 gas stations, a number that dropped to 161,768 in 2008, said Boyett, who is CEO of Boyett Petroleum, a gasoline distributor in California.

Cheaper Gas Prices, but Less Demand

In Praise of Oil Speculation

$1 gallon of gas possible soon, Gulf chief says

India: Soaked by Oil Subsidies

Exec steps up with gift for United Way

2008-12-15T14:02:00.001-08:00

Kim Tillotson Fleming is a businesswoman who leads with her feet.

Fleming, president of the investment firm of Hefren-Tillotson, Inc., walked 16 miles Sunday from the company's Wexford branch to its office Downtown to raise money for United Way of Allegheny County.

"Do you have any champagne?" quipped Fleming, dressed in a long-sleeved United Way T-shirt, workout pants and hiking boots. "Whatever's best for sore muscles."

She arrived at 12:50 p.m., cheered by about a dozen employees, and promptly performed a Rocky Balboa dance. She later handed an oversized check of $180,400 to Robert Nelkin, president of the local United Way. Last year, the company gave about $142,000.

"This is a tough time, and people are struggling, and what you've done is show people in these tough times you can step up," Nelkin said upon accepting the check.

Fleming promised to do the charity walk if her company added 50 donors to the United Way campaign from among 140 employees. Her challenge resulted in 62 new donors, including a five leadership donors who contribute at least $1,000 a year. That raised the number of leadership donors at the company to 22.

Rachel Hawili, retirement plan coordinator, helped recruit the new donors. She said most signed up as a sort of present to Fleming, who celebrated her 50th birthday three weeks ago, rather than to make her make good on her promise.

"If anything," Hawili said, "people felt bad about making her walk."

Fleming completed the 16 miles in less than five hours. She said she didn't do anything special to prepare for the walk but normally works out at least an hour a day playing squash, lifting weights and exercising on a stationary bike or a treadmill.

"It was really a perfect day for doing a walk like this," she said. "If anything, it was almost too warm at times."

Fleming had a close call when a car failed to stop at a stop sign near Community College of Allegheny County's North Campus.

"It almost hit me," she said.

Her husband, Curt, and her 16-year-old son, Todd, joined her for the last six miles through the North Side.

Nelkin said Hefren-Tillotson is not the only company that uses a gimmick to encourage donations. The campaign leader at Highmark, for instance, shaved of a goatee he had sported for 30 years to get employees to contribute.

Nelkin said reaching the campaign goal of $32 million is especially important during the economic downturn.

"Obviously, we're very concerned about the effect of the economy on donations," Nelkin said.

As of Friday, he said, 85 percent of the people who contributed last year were increasing their donation or keeping it at the same level as last year.

The campaign ends April 30.

Fleming said her walk through the area emphasized the importance of the United Way's work.

"I thought of the community and the needs," she said. "When you walk through different neighborhoods, I felt so appreciative of what I have."

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1 in 14 in on the family leave act

2008-12-14T04:54:00.009-08:00

Revisions to the Family and Medical Leave Act that go into effect Jan. 16 resolve some confusion over procedures that allow time off from work, but advocates for employers and employees say the changes fail to address other important issues.

The law affects 95 million workers, allowing job-protected time off to deal with serious health conditions, to care for a newborn or soldiers injured in the line of duty. About 7 million workers a year, or one in 14 eligible workers, use some portion of the law, government figures show.

The Department of Labor said revisions clarify reporting procedures, limit who can access an employee's health records and set time requirements for when workers must see a doctor to certify their reason for taking leave. Those revisions are based on 15 years of experience with the act, as well as several Supreme Court and lower court rulings.

"The new regulations provide clarification and guidance in a few areas, such as 'serious health condition' that is helpful," said John Henry, vice president of human resources at the University of Pittsburgh Medical Center, where 3,700 employees took leave under the law in the past year. UPMC has 50,000 employees globally. "Although the new regulations require some modifications, we think they are manageable."

The Pennsylvania Manufacturer's Association, which represents the state's largest manufacturers, believes the "reforms look to be a perfectly reasonable clarification in the law to make it work for employers and employees like the way it was intended to do," spokesman David Taylor said.

But other spokesmen for employers say the revisions failed to resolve some important issues, such as concerns that intermittent leave -- an employee taking their 12 weeks of unpaid leave in increments of a few hours or a day at a time -- could be open to abuse. The Labor Department said that about 1.7 million workers, or about 24 percent who took the leave in 2005, took their leave in intermittent periods.

"Intermittent leave disrupts a workplace. It can be a blanket excuse to call-in and say they are not coming in," said George Basara, an attorney representing management in employment and labor law at the Downtown firm of Buchanan Ingersoll & Rooney P.C. "It's easily abused and hard for an employer to work around."

The Port Authority Transit of Allegheny County, which recently reached a contract with the Amalgamated Transit Union Local 85, said in a statement that "the revised regulations do not go far enough to assist employers with those who abuse intermittent leave." The Port Authority was among those who submitted 20,000 comments to the Labor Department about the proposed revisions.

Intermittent leave proved to be a blessing for Nettie Sullenberger of Latrobe, a home health nurse whose husband, Charles, underwent heart transplant surgery in December 2007. By using intermittent leave in her part-time job with UPMC/Jefferson Regional Health, she was able to retain her health care insurance, while taking time off to help her husband in his first three months after the surgery.

"My husband had a long road to recovery. I was able to go to work and keep my mind occupied ... and not worry about losing medical benefits," Sullenberger said.

The provisions of the Family and Medical Leave Act are critical to women because they are not forced "to choose between their family and a job, which is so important in this economy," said Mary Ann Eisenreich, executive director of Pennsylvania Women Work, a Downtown-based nonprofit.

Sharon McNemar of North Apollo found the medical leave act gave her the chance to take six weeks off work this past summer to care for her mother, Margaret Ross, after her father, James Ross, had surgery.

"I took time off to help my father, who is my mother's primary caregiver. The only alternative was a nursing home" for her mother, said McNemar, a rehabilitation team assistant for UPMC/Jefferson Regional Home Health in Seven Fields.

"It worked out really well. I don't get to spend that much time with them," she said of her parents, both 79, who live in Spring Church, Armstrong County.

Some supporters of the medical leave act were disappointed with some of the revisions and some issues the Labor Department failed to address.

Among issues that upset supporters were requirements that workers now must follow a company's normal call-in procedure for missing work, unless there are unusual circumstances. Before the revisions, workers could miss up to two work days before notifying their boss they were taking unpaid leave.

"It's generally detrimental to nonmilitary workers, and it restricts eligibility standards for medical leave and creates a variety of additional hurdles for employees with health issues," said Bruce Fox, a Downtown attorney who represents people in discrimination cases for Obermayer Rebmann Maxwell & Hippel LLP.

Provisions that permit employers to require a "fitness for duty certification" from a physician, or workers being forced to see a doctor to say they can do a job, could lead to "a whole bunch of litigation," because of differing medical opinions on a patient's health, said Bill George, president of the Pennsylvania AFL-CIO, which represents 900,000 Pennsylvania union members in 1,400 local unions.

By permitting an employer access to medical records of a worker or their family member to certify their medical reason for taking a leave, their privacy could be jeopardized, said Sharyn Tejani, senior policy counsel for the National Partnership for Women and Families, a Washington-based group that worked for passage of the law during the Clinton administration in 1993. Companies could gain access to sensitive medical information that workers would rather not share, she noted.

The Labor Department also missed a chance, Tejani said, to expand coverage to millions of workers by requiring more employers to abide by the law. Companies with more than 50 employees must abide by its regulations. "The FMLA requirements should be lowered to 15 employees like the Civil Rights law. It should mirror that," Tejani said.

Labor and management groups agree that the new regulations will help families of military soldiers injured in the line of duty. The new rules increase from 12 weeks to 26 weeks the amount of time a worker can take off to care for a family member who was seriously wounded or suffered a serious illness.

Family members of reservists on active duty can take the unpaid leave to take care of personal matters for those serving in the military, but it fails to define what kind of "exigencies" -- situations demanding immediate attention -- are covered by the job-protected leave, Korbell said.

The revisions

The Department of Labor revised the Family and Medical Leave Act, which permits workers in companies with more than 50 employees to take up to 12 weeks of job-protected leave a year for treatment of a serious health condition or to care for a child or seriously ill spouse or parent. Employees must have worked 1,250 hours in the past year to take the unpaid leave. The revisions:

Expand from 12 weeks to 26 weeks the length of leave for military families to care for a service member with serious illness or injury while on duty.

Allow family members of National Guard or Reserve personnel on active duty, to take FMLA leave to handle soldier's affairs, such as child care, financial matters, recuperation and post-deployment activities.

Require workers to follow their company's normal call-in procedure for taking time off instead of allowing workers two days off before notifying employer of the leave.

Bar a worker's direct supervisor from contacting an employee's physician to get medical information and limit managers who are permitted to contact that physician.

Require employees who take more than three consecutive days of leave to have two visits to a doctor within 30 days of being ill or injured.

Ensure that time spent on "light duty" work does not count against FMLA leave entitlement.

Increase obligations of employers so workers will better understand their FMLA rights.

Sources: Department of Labor, Employment Standards Administration

Amid economic downturn, bright spots for jobs

GM stamping plant closes; 350 lose jobs

2008-12-14T04:54:00.007-08:00

General Motors has closed its West Mifflin metal stamping plant, leaving several hundred people jobless.

The plant was one of 11 plants targeted for closure by September 2007, but it remained open as GM tried to find a buyer. A potential sale fell through in April.

GM spokesman Chris Lee says the plant produced its last part on Nov. 20 and finished processing work Friday.

About 350 maintenance and production people worked at the plant. A handful of skilled craftspeople will remain until mid-January, when GM will auction the plant's equipment. The plant had been in operation for 58 years and employed 3,000 people at its peak in the 1950s. Most recently, it made fenders, doors and hoods for the Chevy Cobalt.

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Airport promotes European destination for first time since 2004

2008-12-14T04:54:00.005-08:00

The Allegheny County Airport Authority board of directors voted Friday to spend $600,000, half in 2009 and half in 2010, to help promote Delta Air Lines' direct Pittsburgh-to-Paris flight, which begins in June.

The authority, which operates Pittsburgh International Airport, will move $200,000 in real estate marketing money not spent in 2008 to the authority's 2009 marketing budget, said Executive Director Brad Penrod. That, coupled with one-third of authority's main $300,000 annual marketing budget, will be spent to promote Pittsburgh's first trans-Atlantic flight since November 2004.

"We're committing part of our routine marketing effort to the Paris flight," Penrod said. The authority's budget is funded by fees it charges to the 13 commercial airlines operating at the Findlay-based facility.

Delta will begin the five-day per week service June 3. The service will be assessed after the first year, and Gov. Ed Rendell's office and the private Allegheny Conference on Community Development have each said they would pay Delta as much as $2.5 million through June 2011 should the airline fail to make its revenue projections. Each has pledged up to an additional $2 million in the third year, although Allegheny Conference CEO Michael Langley said if the service struggles in the second year, there likely would be no third year.

The authority announced it has rejected two bids made earlier this year for a contract to improve energy efficiency at Pittsburgh International. Penrod said the energy market has changed since the bid proposals were solicited last spring. New bids will likely by due by March 2009, he added.

Troy T. Geanopulos, president of CLT Efficient Technologies Group, said the Carnegie-based company is committed to pursuing the business. James Platz, an executive with rival bidder Siemens Building Technologies Inc. of Bridgeville, declined to comment yesterday.

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2 dozen news workers accept buyouts at Post-Gazette

2008-12-14T04:54:00.003-08:00

About two dozen newsroom employees at the Pittsburgh Post-Gazette accepted buyouts on Friday from the newspaper, which floated the offer to cut costs.

Had fewer than 18 agreed to forfeit their jobs, management might have resorted to layoffs, a union official said.

The Post-Gazette offered to buy out about half the employees in its 200-person newsroom in mid-October. Workers who accept will receive one year of salary and one year of health care coverage, plus an option to buy two more years' coverage. Eligible are those whose age plus years of P-G service equal 70 or more.

P-G parent Block Communications Inc., Toledo, Ohio, on Thursday said it would lay off 25 workers at a sister paper, The Blade in Toledo, due to declining revenue.

Executive Editor David Shribman said the newspaper would "have to examine" whether any layoffs would still be necessary. He told workers in September that staff cuts were needed throughout the company but could not say yesterday how much money the buyouts would save.

R.J. Hufnagle, president of the Newspaper Guild of Pittsburgh and P-G associate business editor, declined to comment.

"It's always sad to say good-bye to colleagues," said Shribman. "Newspaper editors across the country are doing this, but so are people who run plants, factories and other businesses."

The newspaper is laying off between 10 and 20 Teamsters from jobs in circulation, transportation and the stock room by year's end. The P-G laid off 80 such workers in early 2007.

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Heating help eligibility, funding expands

2008-12-14T04:54:00.001-08:00

While more Pennsylvania families are seeking federal money this year to help pay their winter heating bills, thousands of others who would qualify never apply because they think the grants are only for those in dire need.

The bottom line: People whose household incomes fall under the limits -- and the threshold is much higher this year -- are eligible for Low Income Home Energy Assistance money, say social services, government and utility representatives.

"The biggest challenge for LIHEAP right now is getting people who feel they would never qualify to apply," Josh Wertheim, utility specialist with the Millvale office of North Hills Community Outreach, said.

"There's always been a stigma in Pittsburgh about asking for help," he said. "But this is not a handout -- everyone needs help right now."

Nationwide, $5.1 billion in home heating aid is available this winter, up from $2.6 billion last year.

Pennsylvania's share this year is $275 million, and the key difference is that families can earn up to 210 percent above federal poverty guideline numbers and still receive money. That's up from 150 percent last year.

To put those numbers into perspective, a household with four people can earn up to $44,443 this winter, up from $30,975 a year ago.

Columbia Gas of Pennsylvania spokesman George Stark said about 300,000 individuals and families statewide got LIHEAP money last winter, but a million were eligible. This year, about 1.4 million would qualify, he said.

As of last weekend, 373,000 people had applied for LIHEAP cash grants to help cover their heating bills, an increase of 87,000 from the same time a year ago, said Stacey Witalec, spokeswoman for the state Department of Public Welfare, which administers LIHEAP in Pennsylvania. The minimum cash grant is $300, up from $100 last year.

Allegheny County's Department of Human Services, meanwhile, processed 4,131 crisis grant applications in November for homeowners who need to repair a furnace or are in immediate danger of losing utility service, for example. That's up 44 percent from November of last year. Crisis grants can run as high as $800.

"We have been going nonstop since Nov. 3" when LIHEAP opened, said Lynda Black, LIHEAP team coordinator for the county. "We are seeing a whole lot of new people that we have never seen before, entering into the system." Witalec said statewide, crisis applications are down slightly.

Wertheim, meanwhile, said he helped about 60 people apply for the federal grants last month at his Millvale office, up from about 16 in November 2007. Families are seeking help this year because of job losses, higher mortgage payments and other bills that are "getting out of control," he said.

Families mistakenly think they can skip a utility bill for a month, "and then they freak out when the get the termination notice," he said, adding that with the current economy, "I deal with a lot of people who are under a great deal of stress."

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Saturn loyalists left in limbo with auto bailout

2008-12-12T09:26:00.003-08:00

In exchange for its share of a $14 billion auto-industry rescue package, General Motors Corp. has promised Congress it would retool its business plan.

But Saturn customers and 425 dealerships -- including five in the Pittsburgh area -- worry GM might sacrifice the Saturn brand in the process. Why? The division launched in 1985 as "a different kind of car company" has never made money.

"Would we miss it? Absolutely," said Steve Lelich, chief operating officer of Day Automotive Group in Monroeville, which sells 22 brands in the area, and has three Saturn dealerships.

"We've had a loyal customer base in Western Pennsylvania over the years, and it's tough to turn those people away," said Lelich.

Allene Byrnes of Carrick is one of them. She bought an SL2 sedan in 2002 and hopes to replace it with a new Saturn next spring.

"It's a good car. It's very dependable," said Byrnes, 47, as she waited for her Saturn to be serviced at Saturn of West Liberty in Dormont. "I've had six cars, all different brands. And this one's lasted the longest."

GM launched Saturn to compete more effectively with scrappy Japanese imports such as Honda and Toyota in the late 1980s. Saturn cars were aimed at cost-conscious buyers who wanted good vehicle value without haggling with salesmen.

In a Detroit radio interview last week, GM's North American Sales Vice President Mark LaNeve, a Beaver Falls native, called Saturn "a great brand with great dealers." But the division had "a very tough time making money because of its low price points."

With Saturns priced as low as $12,000 in years past, GM could not cover its costs. So the brand took on fancier features and bulked up -- in size and sticker prices. The average Saturn vehicle costs about $24,000, including the big Saturn Outlook sport utility vehicle.

Sales of Saturn vehicles nationally have plunged 20.9 percent through November compared with a year ago. That's significantly higher than the U.S. auto industry's 16 percent drop.

In the Pittsburgh region, Saturn sales are projected to fall from 2,185 units in 2007 to 1,768 this year, a market-share dip from 1.6 percent to 1.4 percent, according to estimates from the Greater Pittsburgh Automobile Dealers Association.

Meanwhile, GM, Ford Motor and Chrysler await a Senate vote on the $14 billion rescue package passed by the House late Wednesday. Some legislators -- and consumers -- think the automakers should declare bankruptcy and wring concessions from creditors and workers before getting federal aid.

"I'm not in favor of bailing them out because you have to hold businesses accountable for what they do," said Jim Krandel, 51, a Saturn Vue owner in Bethel Park. "But if GM keeps the brand, I look forward some day to buying another Saturn."

GM said it will either: Sell the Saturn brand, such as it's trying to do with Hummer; fold it into other GM brands, such as Chevrolet; or simply eliminate Saturn, such as GM did several years ago with Oldsmobile. But the Olds exit cost GM about $1 billion to buy out dealers, and Saturn could cost about $1.7 billion, say industry experts.

"We recognize there's some uncertainty in terms of GM's business," said Calvin Lane, director of sales at #1 Cochran, the region's largest GM dealer, including two local Saturn dealerships. "But we are optimistic in terms of the restructuring and Saturn's role in it." He declined to discuss sales volumes.

Day Automotive's three Saturn dealerships in the area have experienced a 12 percent decrease through November, said Lelich, versus the 20.9 percent drop nationally.

"The Pittsburgh market holds up a little better than the national averages," said Lelich. "We actually weren't having a bad year until October and November."

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Latrobe Specialty Steel wins $16.6M Defense deal

2008-12-12T09:26:00.001-08:00

Latrobe Specialty Steel Co. won a $16.6 million contract from the Department of Defense that will give military suppliers priority to buy its alloy steel products used to make parts for helicopters, jet engines and armored vehicles.

The cost-sharing contract the U.S. Air Force awarded the specialty steelmaker late Wednesday covers Latrobe Specialty Steel's vacuum melted and remelted alloy steels, said CEO Hans Sack.

The Latrobe company is installing new vacuum induction melting furnaces and vacuum arc remelting furnaces. It's expected the priority given to the military suppliers will continue for about 10 years, spokeswoman Lisa Pierce said.

The Defense Department sought the agreement because it wants to reduce delays of as long as 72 weeks in filling orders for alloy steels used to make rotor shafts for helicopters, hot sections on jet engines or torsion bar suspensions on vehicles, said Rep. John Murtha, D-Johnstown. Even with Latrobe Specialty Steel running its vacuum induction melting facility at 100 percent capacity, Murtha said lead times lagged.

Latrobe Specialty Steel said it will spend about $53.5 million on construction of new furnaces at its Latrobe plant. The agreement does not give the Defense Department any of the revenues from selling alloy steels used by suppliers to fabricate parts for military applications, Sack said.

The new furnaces will create about 40 jobs at the company's plants in Latrobe, and Sandycreek in Venango County. Sack said about 70 percent of the new jobs will be created at the Latrobe plant, which has more than 500 employees.

The company is continuing to produce test molds in the new furnaces and it expects to bring the project online early next year, Sack said. When production ramps up, additional workers will be hired.

Latrobe Specialty Steel won the contract in competitive bidding, the Air Force said. Additional contracts depend on funding approved by Congress, Pierce said.

A spokesperson for the Air Force could not be reached for further comment.

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$14B auto bailout collapses in Senate

2008-12-12T09:14:00.009-08:00

WASHINGTON -- A $14 billion emergency bailout for U.S. automakers collapsed in the Senate Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.

The collapse came after bipartisan talks on the auto rescue broke down over GOP demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.

Majority Leader Harry Reid said he hoped President George W. Bush would tap the $700 billion Wall Street bailout fund for emergency aid to the automakers. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

The White House said it was evaluating its options in light of the breakdown.

"It's disappointing that Congress failed to act tonight," a White House statement said. "We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable."

The Senate rejected the bailout 52-35 on a procedural vote after the talks collapsed.

The implosion followed an unprecedented marathon negotiations at the Capitol among labor, the auto industry and lawmakers who bargained into the night in efforts to salvage the auto bailout at a time of soaring job losses and widespread economic turmoil.

The group came close to agreement, but it stalled over the UAW's refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.

Reid called the bill's collapse "a loss for the country," adding: "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight."

"In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman who led negotiations on the package.

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Highmark to pioneer retail sales approach in North Hills

2008-12-12T09:14:00.007-08:00

Highmark Blue Cross Blue Shield said Thursday it will open a retail store in late January or February in the North Hills to help individuals and small business owners choose health insurance plans.

Downtown-based Highmark said it will be the first health insurer in Pennsylvania to open retail locations, with its Highmark Direct store in the McKnight Seibert Shopping Center off McKnight Road in Ross, and a second store planned in Mechanicsburg, Cumberland County, near Harrisburg.

More consumers are choosing coverage for themselves on their own these days, or trying to decide on plans to cover a few employees.

"We understand how health insurance is confusing," said Steven Nelson, Highmark's vice president of consumerism and retail marketing.

Along with Highmark's Web site and telephone call-in service, he said, the two stores can help visitors looking at Highmark plans make informed choices.

The Ross pilot store and the other site at the Silver Springs Square Shopping Center in Mechanicsburg, won't replace the six Highmark Member Service offices across Western Pennsylvania, Nelson said. Highmark has 3.1 million members in Western Pennsylvania.

The stores will primarily handle sales. Visitors to the Ross location, for example, will be able to meet with Highmark sales associates to discuss insurance options and apply for plans.

Anyone who doesn't receive insurance through work, senior citizens who want to supplement other coverage and business owners are potential customers. Two to four people will work at each store.

Self-service kiosks where customers can research plans will be available in the 2,715-square-foot Ross store, as will a waiting area with interactive health assessment tools and a kids' activity center. Customers can meet privately with representatives or participate in video conferences.

Later, Nelson said, the stores will hold seminars on topics such as diet and wellness, along with specifics on insurance, in an area with seating for about 25 people.

The stores tentatively are set to operate from 10 a.m. to 7 p.m. Mondays through Saturdays. Environmentally friendly construction techniques will be used, and the stores will be fully accessible for people with disabilities, he said.

Insurers in other markets are branching into retail locations.

"The first was Florida Blue Cross, out of Jacksonville. They opened one store, then another and now they're planning a third," Nelson said. Other insurers have tried the concept in Alabama and Kentucky, though it is still very new.

UPMC Health Plan, which competes with Highmark in the region, will continue marketing its plans through brochures, its Web site, phone representatives and face-to-face visits, said Jeff Nelson, vice president of marketing and communications and no relation to Steven Nelson.

While the stores are "a nice idea on their part," he said of Highmark, "we don't view health insurance as a mall-type of purchase." UPMC's plan has 1.3 million members across the state.

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Feds tell PNC to sell 61 National City branches

2008-12-12T09:14:00.005-08:00

PNC Financial Services Group Inc. is being told by the federal government to sell 61 branches of National City Corp. in western Pennsylvania as a condition for acquiring the bank, according to a person familiar with the matter.

National City's nearly 30,000 employees, from top managers to bank tellers, were being informed during the afternoon that the Department of Justice would announce the order later in the day, the person said on condition of anonymity because he was not authorized to speak publicly about the planned sale. National City is based in Cleveland.

A spokesman for the Department of Justice declined to comment.

The department's order wasn't a surprise; PNC Chairman James Rohr said when the $5.6 billion deal was announced Oct. 24 that the combined bank might be forced to sell branches in western Pennsylvania. The bank becomes the nation's fifth largest by deposits and the fourth biggest in terms of branches.

It was not immediately known which branches would be affected, or what the impact might be on employees or account holders. It was also too early to tell who might be potential buyers. It is fairly common for the government to make branch sales a condition of antitrust approval for a merger between banks that are located close to one another.

Pittsburgh-based PNC is the first U.S. bank to use money obtained under the government's $700 billion bailout program to make an acquisition.

Both banks for years have been mentioned for a possible combination. The banks agreed to the deal because their businesses have been hurt by high-risk mortgage loans, and National City has been weighed down by Ohio's struggling economy.

National City lost $5.15 billion during the third quarter, and was in the midst of a three-year program to cut 4,000 jobs before PNC made an offer to acquire the bank. PNC Financial said it will aggressively take write-downs and increase reserves on National City's loan portfolio when the deal closes.

PNC was profitable last quarter despite credit losses. It projects that National City's battered lending portfolio might incur $19.9 billion of lifetime losses.

The combined bank will have about $180 billion in deposits and more than 2,700 branches located mostly in the Mid-Atlantic and Midwest states as well as Florida. The combined bank also will have the largest deposit bases in Pennsylvania, Ohio and Kentucky.

It was not expected that the Department of Justice would require PNC to unload any other branches, the person said. The acquisition is expected to be completed, pending regulatory and shareholder approval, by the end of the year.

The bank said Wednesday that the integration between PNC and National City could take until late 2009 to be completed once the deal closes.

The credit crisis has forced a number of marriages of high-profile banks, including JPMorgan Chase & Co.'s purchase of Washington Mutual Inc. and Wells Fargo & Co.'s acquisition of Wachovia Corp.

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Highmark to open insurance store in Ross

2008-12-12T09:14:00.003-08:00

Highmark Blue Cross Blue Shield said this morning it will open a local store early next year to help people and small business owners choose health insurance plans.

Downtown-based Highmark said it's the first health insurer in Pennsylvania to open a retail location. The Highmark Direct store will be in the McKnight Seibert Shopping Center off McKnight Road in Ross, and tentatively is set to operate from 10 a.m. to 7 p.m. Mondays through Saturdays.

"As the health insurance market becomes increasingly consumer-driven, health insurers are positioning themselves to meet growing demands for health insurance products and information through retail marketing channels," said Steven Nelson, the company's vice president of consumerism and retail marketing.

Visitors to the store will be able to meet with Highmark sales associates, to discuss insurance options and apply for plans. People who don't receive insurance through work, seniors who want to supplement other coverage and business owners are potential customers, Highmark said.

Self-service kiosks where customers can research plans on their own also will be available, and the store will hold seminars on health insurance topics.

Highmark also will open a similar store in Mechanicsburg. The stores won't replace current Highmark Member Service offices, the company said.

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Even in economic downturn, area's energy jobs go begging

2008-12-12T09:14:00.001-08:00

Nuclear pioneer Westinghouse Electric Co. and the Fort Worth, Texas-based oil and natural gas drilling company Range Resources Corp. have a voracious appetite for workers.

Both are on a growth boom not experienced in Westinghouse's case in more than 30 years, as both are players in the production of energy.

"One drilling rig in this area accounts for 150 full-time jobs, and we look to have six rigs up and operating by the end of next year," said Range spokesman Matt Pitzarella. "That's almost 1,000 jobs -- and that's not counting positions with affiliated companies."

With Westinghouse hiring 2,000 people between 2005 and 2008, and plans to add 500 more in each of the next four or five years, finding qualified people can be a tall order.

Energy companies look for assistance from staffing firms like North Shore-based System One Holdings LLC and J Mar & Associates of Plano, Texas.

"Oil and gas companies doing business in the Western Pennsylvania area ... all tell me they're busy," said Susan Reinis, with J Mar & Associates. "We've worked with a Fort Worth-based oil and gas company for a few years in the Appalachian Basin area, and we've placed with them a senior geologist, a mid-level geologist, and now we're working with them to find a senior geophysicist."

On a given night, workers from outside the area who are employed at Range projects occupy 400 to 500 hotel rooms just in Washington County, as there aren't enough local job seekers to satisfy demand. The average annual wage, including benefits, for jobs ranging from administrative to senior petroleum engineers, is $80,000, said Range's Pitzarella.

"The ability to build energy infrastructure is pretty limited in this country," said Michael Corradini, chairman of the Nuclear Engineering and Engineering Physics Department at the University of Wisconsin-Madison. "It's not just a shortage of nuclear engineers, but of all the trades involved in building, because coal plants, nuclear plants, all need pipefitters, carpenters, civil engineers."

System One was formed early this year in a spinoff from Monster.com and selected Pittsburgh for its headquarters because of the demand for energy industry personnel, said CEO Troy Gregory.

"We bought the business in February because we felt it was a solid business, with a solid customer base," said Gregory. "We believe that Pittsburgh is a great hub for the energy industry."

System One employs about 150 people nationwide, including 50 at its Federal Street office, working on placing 3,000 contractors in jobs in the energy, engineering, information technology, engineering and commercial fields. It also has offices at Westinghouse's headquarters in Monroeville, and at its Waltz Mill facility, near Madison, Westmoreland County.

"The people work for us, we handle all the payroll taxes, all the paperwork for our clients," Gregory said. Entry-level people start in the $18-an-hour range, with senior personnel earning in the $60 to $70 range, Gregory said.

Former county Chief Executive Jim Roddey became familiar with System One through accounting firm McCrory & McDowell LLC, where Roddey serves as a senior consultant.

"They've stayed under the radar since they came to town," but its annual revenues are in the $185 million range and could hit $500 million in the next few years, said Roddey, who is doing marketing work for System One.

To find job candidates, System One works with community colleges and trade schools. In the Pittsburgh market, that includes Beaver County Community College, said spokeswoman Susan Changnon.

System One has founded its own school, in Cheswick, which offers 12-week courses on nondestructive testing and quality control technologies.

Range's Pitzarella said his company is talking with universities in the region that don't offer petroleum engineering degrees. Only Penn State and West Virginia now offer such degrees.

"We're also in discussion with a number of parties to put together a public-private cooperative partnership to provide more workers, because if we don't develop the work force here, the potential won't be recognized."

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Area companies turn with times in wind energy

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Why Small Manufacturers Are Going Green

'Broken SBA' creates crunch for owners, advocate says

2008-12-12T09:13:00.000-08:00

While small businesses create most jobs and economic output, today's tight credit conditions could squeeze them out of the inevitable economic recovery, a leading small-business advocate said Wednesday.

The recession that began a year ago meant that "suddenly, the small-business water got turned off. They lost access to capital," said local entrepreneur Marilyn Landis, 2008 chair of the National Small Business Association.

"We have to be part of this recovery. We have to be involved," Landis told members of the Economic Club of Pittsburgh at Omni William Penn Hotel, Downtown.

Landis and other small-business leaders plan to meet today with members of President-elect Barack Obama's transition team to express concern about the health of small business. Chief among them is access to capital, especially from the Small Business Administration.

"I'm going to tell them the SBA, as we know it, is broken," said Landis, president of Basic Business Concepts Inc., North Side, a small-business consultant. She also chairs SMC Business Councils, Churchill, which has about 2,300, small-business members in the region.

Landis said the federal agency has hurt small-business credit in recent years by "finding more ways to get out of guaranteeing SBA loans" and shifting administrative costs onto banks that make SBA-backed loans. Such measures have led many banks to stop making SBA loans and have stalled the pooling of such loans into securities and their sales to investors -- a process that increases money available for more loans.

"In the last month, about half the Top 10 SBA lenders in the country have shut down" or sharply curtailed their SBA loan programs, including CIT and Comerica, said Landis. As a result, SBA-backed loans for the year ended Sept. 30 dropped by 30 percent.

The government's financial bailout "can't just focus on the too-big-to-fail" corporations, such as American International Group (AIG) or Fannie Mae and Freddie Mac, said Landis. She also said the SBA should widen its credit mission to include direct loans to small businesses -- defined as those with up to 500 employees.

Small businesses' output of goods and services represents about 60 percent of non-farm, U.S. gross domestic product. And small businesses have created about 93 percent, or 21.9 million, of the new jobs in America since 1989, said Landis, citing association figures.

Through the third quarter of this recessionary year, however, small businesses have created only about 2 percent of U.S. jobs, she said. A survey by her association in August, for instance, showed that 44 percent of its 150,000 small-business members were not filling open positions.

"We're in the teeth of a very nasty recession," said Robert Dye, senior economist for PNC Financial Services Group yesterday, calling the 533,000 lost jobs in November "a very sobering statistic."

Credit for small businesses currently is "very, very tight," said Dye, but he projects lending to loosen up at bit "at least by mid-year."

McCain and Obama on Small Business Issues

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Shifting into Cost-Cutting Mode

Airport to handle flower shipments from South America

2008-12-10T15:06:00.007-08:00

By end of February, cargo planes carrying fresh-cut flowers from South America will fly directly to Pittsburgh International Airport for wholesale distribution across the Midwest and Northeast, executives with a startup air freight company said Tuesday.

Pilgrim Air Cargo Inc. said it plans to fly DC-8s or Boeing 747s once or twice a week from South America to Pittsburgh International's Cargo Terminal A in Moon.

Lack of passenger business because of US Airways dramatic downsizing has caused hardship at Pittsburgh International. In this case, however, the resulting lack of airport congestion -- and the facility's proximity to 50 percent of the U.S. flower purchasing market -- were winning qualities.

"Pittsburgh is our 'secret sauce,' " said Douglas Grossinger, executive vice president for corporate development for Pilgrim Air, which also considered basing its operations in St. Louis or Chicago. Compared to Miami International Airport, where most air imports from South American land and endure extended delays, he said Pittsburgh International cargo crews have committed to swiftly unload the perishable freight onto trucks.

"This is much more streamlined," Grossinger said. "It will allow us to build a business in way that's consistent and reliable."

Seventy percent of all cut flowers sold in the United States are grown in Colombia and Ecuador, according to the Wholesale Florist & Florist Supplier Association. International floriculture in those countries kicked into high gear in 1991 with a trade pact that aimed to offer Andean farmers alternatives to drug crops. That accord eliminated tariffs on roses, carnations and other fresh-cut flowers, which are flown to South Florida and trucked across the country in refrigerated tractor-trailers.

Pilgrim Air was formed by Boston entrepreneur Joe Germano and his father in partnership with pilot and businessman Jai Singh, also of Boston. Pilots from Colombia and air cargo owners from Tampa round out the top management, Grossinger said. He declined to put a dollar figure on the company's investment.

Bob Miller, director of Aviation Facilities Co. Inc.'s, which operates the Pittsburgh cargo terminals, said Pilgrim Air will lease as much as 30,000-square-feet of space in Cargo Terminal A. Customs and Border Protection Service is housed in that terminal, which will ease inspections, he said. He expects the company to employ between 15 and 20 people locally.

One challenge for Pilgrim Air will be to find cargo for the return trip from Pittsburgh to points south. Grossinger said the company is developing a "backhaul" business in cargo that flies from New York's congested John F. Kennedy International Airport to Miami, where it will also be operating.

Bob Luthultz is president of the Pittsburgh Cut Flower Co., a Strip District-based wholesaler that sells to several hundred regional florists. He said shaving two or three days of truck transport from the supply chain would be great -- if the cost is about the same.

"That could translate into extended 'face time' of flowers in the home of consumers.' Luthultz said. "Any improvement in the time it takes to get flowers from Colombia into our local market is something we would be very interested in."

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Sony to shutter plant; 560 to lose jobs

2008-12-10T15:06:00.005-08:00

HARRISBURG -- Sony Corp. said Tuesday it will close its flat-screen TV production plant in Westmoreland County over the next 16 months as part of a global downsizing.

The company told employees it would discontinue operations beginning with television manufacturing by the end of February. Fewer than one-third of employees likely will be working at the plant in six months, spokesman Michael Koff said.

Gov. Ed Rendell said the plant is a casualty of the worldwide recession and innovations in making flat-panel televisions lighter. The lighter televisions can be shipped more easily from overseas, making a U.S. production facility unnecessary, he said.

Rendell said he learned of the closing Monday. He met with Sony officials at the governor's mansion in the morning, as the Japanese electronics maker announced from Tokyo that it would slash 8,000 jobs, or 4 percent of its global work force.

"We probed very deeply what the reasons were behind it, to see if there's anything we could do as a state," Rendell said.

The sprawling plant in East Huntingdon and Hempfield, which opened in 1992, employs 560 people. Rendell said the state would offer those employees retraining and job placement services.

State officials are working to court two other companies to move into the site, he said. Rendell said one company might be committed to moving into the plant and a second is interested, but he wouldn't name the firms.

"One is a renewable energy company, which is the wave of the future," Rendell said.

Sony is aiming to cut costs by $1.1 billion a year because of the economic downturn. The corporation has 185,000 employees worldwide and said in an announcement that it will complete job cuts -- all in the electronics sector -- by the end of March 2010.

Sony received $40 million in public incentives when it announced plans to open its plant near New Stanton in an old Volkswagen of America production facility.

Initially, the plant produced large rear-projection TVs, but in recent years has focused primarily on manufacturing flat-panel LCD screens, repairs and logistics. It has been Sony's East Coast TV distribution center.

Sony leases the plant from the Pennsylvania Industrial Development Authority. The company intends to honor the lease, which expires in 2010, Rendell said.

In recent months, the Economic Growth Connection of Westmoreland, a Greensburg-based group, has tried to help Sony reduce overhead at the plant by marketing sections of it and restructuring loans, said John Skiavo, the group's president.

"Locally, they have worked very hard to reduce their costs," Skiavo said.

The plant was Sony's only Northeast-based facility, Skiavo said, noting that Sony suppliers also are based in Western Pennsylvania.

"So, there will be an impact," Skiavo said about the pending closure. Sony plans to cut investment in electronics and outsource some work. The company said the job cuts will vary by country.

Sony's electronics business employs about 160,000 workers. The company also has movie, video game and financial businesses.

The Associated Press contributed to this report.

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Communities brace for economic impact

Contractors referral service finds a niche

2008-12-10T15:06:00.003-08:00

Homeowners looking for a contractor to handle a project at home or business owners wanting to build or remodel have a referral service in Westmoreland County that provides the names of pre-screened contractors.

The Westmoreland Contractor Referral Service has a network of about 20 home-improvement contractors in central Westmoreland County that work in every field, from plumbing to painting to general contracting and remodeling, said Debra Nolan of Greensburg, the owner of the new business.

Nolan, whose husband operated a construction business, said she checks out references, insurance and Better Business Bureau listings to ensure that the contractors she deals with are reputable.

The response to the new service has been "fantastic," Nolan said, with about 50 referrals in the past three months. The service is free to homeowners, but contractors are charged a marketing and advertising fee, Nolan said.

For more information, contact 724-216-5254, or check the Web site.

In this time of economic uncertainty, a new yoga studio that recently opened in downtown Greensburg offers an opportunity for exercise and a reduction in stress.

Moonglow Yoga, operated by Melanie Alexander, is offering several classes, including hot power yoga, Vinyasa flow yoga and yoga for those over 50, at its studio at 114. W. Pittsburgh St.

Alexander, who has studied yoga for more than seven years, also operates a store that offers customers various yoga props and accessories, handmade jewelry and candles, bath and bodycare items and clothing.

For more information, contact Moonglow Yoga at 724-420-5270, or check the yoga studio's Web site.

Valley Dairy, a Latrobe-based chain of 12 family restaurants in Western Pennsylvania, has once again won ribbons for excellence at the ice cream clinic conducted at the recent National Ice Cream Retailers Association's convention in St. Petersburg, Fla.

Valley Dairy's vanilla and chocolate ice cream both scored in the range to receive recognition with a ribbon. Ice cream shops competing in the event had to submit samples of vanilla and one chocolate flavor for clinical analysis weeks in advance of the contest. Points were given in categories that included flavor, color, meltdown, bacteria count, body and texture.

Marcial: Disney Finds Magic in Movies and Networks

Communities brace for economic impact

2008-12-10T15:06:00.001-08:00

Tami Chambers was pumping gas Tuesday for a customer at the Sunoco station on Route 31 in Mt. Pleasant when she heard the news: Sony Corp. is closing its nearby East Huntingdon plant.

Chambers worked at the plant for 18 months before moving to Florida briefly.

"I was hoping to get my job back," she said. "A friend of mine was going to take me out there Wednesday to fill out an application. I liked working for them."

Chambers worked on an assembly line installing components for flat-panel television sets. She said rumors that the plant would close have circulated in the borough for years. The rumors intensified every time a layoff was announced.

"I was hearing that when I worked there," she said.

Nevertheless, the announcement caught her and others in the Westmoreland County community by surprise and left townships and school districts wondering how they will make up the loss in tax revenue.

Don Wilson of Mt. Pleasant said the plant closure will affect an area that's already been hit by the housing market slump.

"The price of houses, when a company comes in, goes up," Wilson said. "The price of homes, when they're leaving, goes down. There have been houses on the market for a couple of years."

While Wilson has had the same job since graduating from high school, he has a nephew and niece who lost their jobs at Sony during previous economic slumps.

"I've worked 42 years for Pepsi," he said. "I'm retiring in six months, never been laid off a day."

Sony is the third manufacturer to vacate the troubled industrial site along Route 119. Chrysler built the plant in the late 1960s but never finished it. Volkswagen took over the facility and produced cars there for a decade.

"Whoever they put in that building stays until the tax breaks are done, and then they leave," Wilson said.

The closure will impact workers from a broad area, according to a 2005 survey by the Economic Growth Connection and the Westmoreland County Industrial Development Corp.

Sony workers live in four states and 14 counties, said John Skiavo, executive director of the Economic Growth Connection.

But the plant's suppliers all are based in Western Pennsylvania.

"We don't know what the impact will be among suppliers," he added.

When Sony closes, the Hempfield Township Municipal Authority will lose its biggest customer, which provided 17 percent of its annual revenue.

On Monday, the authority passed its 2009 budget, which will increase sewage rates by $5 a month because of revenue loss from Sony. The authority was guaranteed at least $100,000 a month from Sony from its American Video Glass Co. When the subsidiary shut down, Sony guaranteed the money to the authority until the agreement expired in October.

Authority Manager Rege Ranella said the income from Sony will decrease next year from $1.2 million to $75,000 under the terms of a deal in which the company agreed to make an annual payment in lieu of real estate taxes.

"It shouldn't be a big impact," Ranella said. "We're going to lose some revenue."

Supervisor Bob Davidson, who is a member of the authority, said the revenue loss could be offset by another sewage project scheduled to go online next year.

Jude Abraham, business manager for the Hempfield Area School District, said the district receives $260,000 from Sony in lieu of taxes. He said the district could be hit with losses from earned income and real estate taxes.

In a struggling economy, the Sony news "is almost adding insult to injury," Abraham said. "No matter which way you look at it, it's a detrimental blow to our economy."

East Huntingdon Supervisor Howard Keefer said the township receives approximately $53,000 in annual payments from Sony in lieu of real estate taxes. Keefer said the board will review the impact but said the township has always been "frugal."

"We hate to see it go," he said. "It's been a good relationship. That building sitting there (vacant) is not a good thing."

Mt. Pleasant Borough Manager Jeff Landy was surprised to hear about the closing given the high demand for flat-panel television sets.

"I heard they were selling well," he said.

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Sony to shutter plant; 560 to lose jobs

Russia’s Economy: How Bad Will It Get?

Carnegie Mellon to freeze wages, review projects

2008-12-09T14:22:00.001-08:00

The sour economy has prompted Carnegie Mellon University officials to freeze wages next year and review plans to hire new employees and undertake capital projects.

"The global economy has not improved since early November, and it appears that the downturn will continue for an extended period," wrote CMU President Jared L. Cohon in an e-mail Monday to faculty, staff and students.

"The decline in the stock markets has reduced the size of our endowment, which will have a negative effect on our operating budget for the next several years," Cohon wrote.

The letter outlines a three-pronged contingency plan to contain costs that includes:

A review of capital projects in development and those under way. Cohon stressed that no decision has been made to delay any specific project.

Over the summer, the university completed renovations to a number of classrooms, dormitories, labs and other buildings with plans to continue such projects, said Teresa Thomas, a spokeswoman for the university.

A one-year salary freeze will go into effect on July 1. The pay freeze, which affects the university's more than 4,700 employees, will include the university president and other members of the administration, according to the letter.

The university has about 10,000 graduate and undergraduate students.

Employees who are promoted during the freeze or fill a higher-paid position will receive the higher salary, according to Thomas.

"We will review this salary freeze during the next fiscal year, with an eye toward resuming pay increases as soon as it is prudent to do so," Cohon wrote.

Beginning in January, a different process will be used to review new hires. Before an employee is hired in an academic unit, the individual will have to first be approved by the dean and provost. Hires for the university's administrative areas will have to be reviewed by the department head as well as a vice president and the president.

While Cohon characterized the university's economic circumstances as a time to "tighten our belts," he said it was important "to invest strategically, maintaining Carnegie Mellon's momentum."

"I know this is a difficult time for everyone, here and at home, but with these plans in place I am confident we will continue the exceptional and ground-breaking work for which this university has become known," Cohon wrote.

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Local homebuyers go after mortgages with lower rates

2008-12-09T14:21:00.005-08:00

Mortgage refinancing applications are surging, with people like Kevin Riffit of Franklin Park jumping at the opportunity to lower monthly payments on their homes.

The boom follows a dive in mortgage interest rates, in the wake of government moves to improve the housing market.

Riffit, who had been paying about 7 percent in interest combined on an existing 30-year, fixed-rate mortgage and a home equity line of credit, was able to replace both when mortgage rates dropped into the 5 percent range during the past two weeks.

Lower rates resulted from a Federal Reserve decision to buy $600 billion in mortgage-backed securities issued by financially troubled mortgage industry giants Fannie Mae and Freddie Mac -- the two major players creating the secondary market for mortgage loans.

"Working with Roger LePage of Howard Hanna Financial, which issued my initial mortgages, I combined a credit line and mortgage into one 30-year, fixed-rate mortgage at 5.75 percent," said Riffit, who moved with his wife and three children into his North Hills home about a year ago, after transferring from the Washington, D.C., area.

A growing number of Pittsburgh-area homeowners -- many with adjustable rate mortgages -- are jumping on the refinancing bandwagon, say local real estate financing experts.

Another is Dr. Janet Lazarus, a dentist, who will be saving $150 a month after refinancing a rental house she owns on Lincoln Way in White Oak. She switched from a 30-year, fixed-rate loan at 6 percent to a 15-year, fixed-rate loan at 4.78 percent.

Kim Bell of Bell Mortgage Co. in Monroeville, who arranged the refinancing, said about 35 percent of the calls she now gets are inquiries about refinancing.

The local rush is in line with national trends.

During the week of Nov. 24, refinancing activity tripled nationwide compared to the previous week, according to the Mortgage Bankers Association. This was the largest increase in refinance applications in its 18-year survey. Refinancing activity accounted for 69.1 percent of all new mortgage applications, up from 49.3 percent the previous week.

The last refinancing "boom" started at the end of 2002 and continued until mid-2004, said Paul Juliano, senior loan officer at Omega Financial Services Inc. in Carnegie. "This time, most homeowners who are refinancing are not taking out any cash payments, but refinancing the entire mortgage," he said.

"We don't see many people taking cash out when they re-finance," said Jane Flaherty, vice president at Standard Bank in Monroeville. "What they are doing is paying off their home equity loan by combining it with their new refinanced mortgage."

Many, by refinancing, hope to shorten the term of the mortgage so they can pay it off sooner, she said. Others are using refinancing to consolidate credit card and other debt, she said.

Kevin Laird, vice president of Howard Hanna Mortgage, said about 15 percent of his company's mortgage volume now is in refinancing, and he expects it to jump to 25 percent by the end of the year.

The rate now is about 5.5 percent for a fixed-rate, 30-year mortgage, he said. Prior to the Federal Reserve action, it was 6.125 percent.

Many of Laird's clients are homeowners with adjustable rate mortgages who expect their rates will be adjusted higher in 2009 and 2010.

For a homeowner to refinance, the cost is the same as applying for a new mortgage. That includes application fees, appraisal fees, credit checks, title search and certification of employment.

Flaherty expects about half of her bank's mortgage activity for the remainder of the year will be in refinancing.

"Refinancing inquiries are for both the 30-year and 15-year fixed-rate loans. Although the monthly payments on the 15-year loan may be higher than the 30-year, the amount of interest paid over the life of the loan is much less on the 15-year," Flaherty said.

Freddie Mac said the rate on a 30-year, fixed-rate loan was 5.53 percent as of Dec. 3. Last year at this time, the rate on the loan was 5.96 percent. Rates on 15-year, fixed-rate loans averaged 5.33 percent, down from the 5.74 percent average a week ago. It was 5.65 percent a year ago.

Even lower interest rates may be forthcoming. The Treasury Department is working on a plan to subsidize 30-year, fixed-rate mortgages with rates as low as 4.5 percent.

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Health system selects CEO

2008-12-09T14:21:00.003-08:00

The West Penn Allegheny Health System, rocked over the last 18 months by high-profile executive resignations and financial losses, said Monday that David R. Kiehn has been named chief financial officer, effective Jan. 5.

Kiehn serves as associate director of finance and operations at the Swedish Medical Center/Ballard Campus, in Seattle, where he's responsible for all areas of the hospital's finance, capital and operations budgeting, decision support, patient registration and accounting.

He's credited with implementing long-term financial planning to improve the hospital's profitability and has led a multimillion dollar financial turnaround at the institution, according to West Penn Allegheny.

"We are extremely pleased to have David Kiehn become part of our executive team," West Penn Allegheny Chief Administrative Officer Roy T. Santarella said in a statement. "His professional skills and financial acumen are well suited to the challenges and opportunities we face."

Prior to joining the Swedish Medical Center, Kiehn was vice president of financial operations at Stanford Hospital and Clinics, Palo Alto, Calif.; senior vice president of finance and technology at Evergreen Healthcare, Kirkland, Wash.; and chief financial officer at the University of Washington Medical Center, Seattle.

In the last 18 months, West Penn Allegheny Health System lost its president and CEO, Jerry Fedele, who was replaced less than one year ago by Christopher Olivia. Soon following Fedele out the door was Mark Palmer, president and CEO for barely eight months of the health care system's flagship The Western Pennsylvania Hospital.

In July, West Penn Allegheny disclosed that payments from patients and vendors had been overstated by $73 million, which led to an "informal inquiry" by the Securities and Exchange Commission, and a full fiscal year loss for the region's second-largest medical network of $62.8 million.

Earlier this month, West Penn Allegheny revealed it lost nearly $16 million during the three-month period ending Sept. 30.

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Allegheny General Hospital CEO resigns

Behind Rising Health-Care Costs

Kennywood's president stepping down

2008-12-09T14:21:00.001-08:00

Peter McAneny, president of Kennywood Entertainment, the local company that operates the historic amusement park in West Miffin, is leaving at the end of the year, the company said Monday.

His resignation yesterday occurred six months after Kennywood and its four sister parks were sold to Parques Reunidos, a global amusement parks company based in Madrid. It is in the process of streamlining the management structure of its North American properties, including Kennywood.

"After they bought us, they saw opportunities to consolidate management," said McAneny of his decision. "That's really what part of this is."

McAneny, 56, has been Kennywood's president since 2003, having joined the century-old company 14 years ago. He has no specific career plans yet, he said, following a period assisting the Spanish company with the transition.

"I'm certainly going to stay around here," said McAneny of the Pittsburgh area. "I'll look for another position, that's for sure."

Parques Reunidos did not name a successor yesterday. The Spanish company might simply have each of its five park managers report directly to its North American operation, Palace Entertainment in Newport Beach, Calif., said a Kennywood spokesman, Jeff Filicko.

"At this point, we're trying to work through that," said Filicko of the question of a successor to McAneny.

Family-held Kennywood and its affiliates, including Sandcastle Waterpark, were sold to Parques Reunidos in June for undisclosed terms. It operates 65 amusement, animal and water parks including the Madrid Zoo. It had annual revenue of more than $570 million and its venues had more than 22 million visitors in 2006, according to most-recent figures.

Parques Reunidos is not planning any changes to Kennywood that would be apparent to visitors, said McAneny. Kennywood Entertainment employs about 5,000 companywide at peak times, and about 160 the rest of the year.

"It's been a wonderful place to work," said McAneny. "I have lots of good friends and colleagues here. That's the hard part."

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Nova Chemicals CEO Lipton to retire

2008-12-08T13:00:00.005-08:00

Nova Chemicals Corp. CEO Jeffrey M. Lipton is retiring, effective May 1, and will be replaced by the company's current President and Chief Operating Officer Christopher D. Pappas.

Lipton, 66, who has served as Moon-based Nova's CEO for more than 10 years of his nearly 15 years with the company, will remain on Nova's board until the company's next annual meeting.

"On behalf of Nova Chemicals and the board, I'd like to thank Jeff for his exceptional leadership of our company and substantial contributions to the industry," Nova Chairman James Stanford said, in a statement.

"It's been a privilege to lead Nova Chemicals during its first decade," Lipton said, in a statement. "Despite today's economic uncertainties, I remain very optimistic about the company's prospects, and I am confidant that Chris will provide outstanding shareholder-oriented leadership to a great team."

Pappas, 53, also will retain is president's title and responsibilities. He joined Nova in 2000, and was appointed president and COO this past January.

Nova was spun off in July 1998 from a Canadian company as an independent, publicly traded chemical company. Nova produces plastics and chemicals, with current businesses and joint ventures focused on two product chains: ethylene and polyethylene, and styrene and polystyrene.

CEO and Chairman Out at Alcatel-Lucent

West Penn Allegheny names new finance chief

2008-12-08T13:00:00.003-08:00

The West Penn Allegheny Health System, rocked over the last 18 months by high-profile executive resignations and financial losses, said today that David R. Kiehn has been named chief financial officer, effective Jan. 5.

Kiehn currently serves as associate director of finance and operations at the Swedish Medical Center/Ballard Campus, in Seattle, Wash., where he's responsible for all areas of the hospital's finance, capital and operations budgeting, decision support, patient registration and accounting.

He's credited with implementing long-term financial planning to improve the hospital's profitability and has led a multi-million dollar financial turnaround at the institution, according to West Penn Allegheny.

Prior to joining the Swedish Medical Center, Kiehn was vice president of financial operations at Stanford Hospital and Clinics, Palo Alto, Calif., senior vice president of finance and technology at Evergreen Healthcare, Kirkland, Wash., and chief financial officer at the University of Washington Medical Center, Seattle.

West Penn Allegheny Health System, formed from the remnants of the bankrupt Allegheny Health, Education and Research Foundation in a span of two weeks during July 2007, lost its president and CEO, Jerry Fedele, who was replaced less than one year ago by Christopher Olivia.

Soon following Fedele out the door was Mark Palmer, president and CEO for barely eight months of the health care system's flagship The Western Pennsylvania Hospital..

In late July of this year, West Penn Allegheny disclosed that payments from patients and vendors had been overstated by $73 million, which led to an "informal inquiry" by the SEC, and a full fiscal year loss for the region's second-largest medical network of $62.8 million.

Earlier this month, West Penn Allegheny revealed it lost nearly $16 million during the three-month period ending Sept. 30.

Behind Rising Health-Care Costs

Allegheny General Hospital CEO resigns

Million-Dollar Babies

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Carbon market heartens investors

2008-12-08T13:00:00.001-08:00

WASHINGTON -- U.S. venture capitalists say they see a bright spot amid the international economic gloom: a potential trillion-dollar market in carbon spurred by new regulations and a growing awareness of climate change.

The growth areas are less in traditional "green" businesses like solar panels and windmills and more in new infrastructure, such as a "smart" grid that would get alternative energy from where it's generated to where the customers are, said Martin Whittaker of Mission Point Capital Partners.

Despite the overall economic crisis, "Capital is still available for low carbon projects," Whittaker said. "There's still a lot of optimism and a lot of growth in and around the carbon market at all levels: the trading level, at the project level and at the company level."

He said his firm's fund was looking for returns on investment over a three-to-five year period if the United States puts a price on carbon emissions, which would be necessary if Washington launches a cap-and-trade plan, which would put a price on the right to pollute.

"I think everyone's quite bullish on it," Arrun Kapoor of SJF Funds, a venture capital fund where half of the investment is in "green" projects. He said rising concerns about climate change, energy security and the volatile price of oil are pushing demand for these products.

Kapoor also expressed interest in infrastructure rather than in specific solar or biofuel energy investments, where he said high evaluations of a new company's potential worth is dampening some venture capitalists' enthusiasm.

Because the electric grid is 30 to 40 years old, Kapoor views a new "smart" grid as an attractive investment.

So-called smart grids let customers instantly see the price of the power they are buying, which is expected to cut demand during daily peak load hours and reduce demand from centralized traditional fossil-fuel power plants.

President-elect Barack Obama supports a mandatory cap on all carbon emissions, with an 80 percent reduction in carbon emissions by 2050 -- the level that many scientists have said would head off the worst consequences of global warming.

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Obama may ease stand on environment, Whitman says

Economic tailspin weighs heavily on retirement dreams

2008-12-07T15:32:00.003-08:00

Alex Petroski and his wife, Kathy, had long planned to retire by now. As entrepreneurs who provide parts and equipment to the military, their business has been well-fueled for years by the wars in Iraq and Afghanistan.

Plus, Alex still receives a pension from working 30 years at Honeywell before starting the business in 1999, has paid off the mortgage and has invested carefully for decades.

But Petroski won't be able to "slow down at 60" because the stock market has hit the skids, he said. His investment portfolio in 2008 has dropped "about $400 grand" -- a nearly 40 percent free-fall since the beginning of the year.

"So, now I'm looking at probably 65 before I can retire," said Petroski, 60, of West Deer. "And I'll probably be working part-time then, too."

The Petroskis are like many of the baby boomers whose nest eggs have gone bust from the stock market tailspin. Most are re-evaluating their investment portfolios and even their lifestyles.

The most commonly cited stock barometer, the Dow Jones industrial average, has plunged from an all-time high exceeding 14,000 in October 2007 to about 8,000 on some of its worst days lately.

The National Bureau of Economic Research on Monday confirmed what most people thought: The country entered a recession -- technically two straight quarters of declining output -- a year ago. Meanwhile, a CNN/Opinion Research Corp. poll showed more than four in 10 people believe the nation is mired in a serious recession.

"My 401(k) is now what I call a 201(k),'" said Roger Wise, 62, of his retirement savings plan. Wise should know better than most; he is an estate, trust and wills attorney in Sewickley.

"There's no way I could retire. I'd have to work another five years to be where I was in October 2007, when the market topped out," said the attorney. And Wise has been, well, wise with his money.

For instance, when his wife retired as a public school teacher last June, the couple rolled over her retirement savings into a traditional IRA (Individual Retirement Account) invested strictly in cash, not stocks. Most of their other investments are in mutual funds or exchange traded funds, which mirror stock indexes but trade like stocks.

"I've been in diversified funds," he said. "And they've now lost about 50 percent."

Jay Friday, 62, of Indiana Township, is in similar straits. He's been a manufacturer's rep for more than 20 years, selling plastic injection molded parts and sub-assemblies to companies in the medical industry.

Friday's wife JoAnn, 61, a teacher for about 25 years, currently is teaching first graders in the Hampton Township School District. But she's staying on the job, too.

"We were both hoping to retire when I hit 65, and my wife was planning on retiring this year," said Jay. Those plans are now postponed about five years, they figure. The Fridays' nest egg has lost about 40 percent on paper, compared to a year ago.

Even their local fire department is feeling the heat. Station 172 in Dorseyville, where Friday is a trustee, has postponed a renovation and expansion of the firehouse because contributions have fallen off from market-rocked donors, he said.

Paul McCauley, 65, loves his job as a professor of forensic criminology at Indiana University of Pennsylvania in Indiana, Pa. He first figured on retiring last June.

"Then, I was pretty sure I'd retire in June 2009," said McCauley, of White Township, Indiana County.

Now, he's glad he never submitted his retirement letter to IUP, where he earns about $100,000 a year. With his retirement portfolio down about 40 percent year-to-date, McCauley doubts he and his wife could retire comfortably just relying on some private consulting on the side.

"The wisdom is, if you have a job, keep it," he said.

Other circumstances factor into what boomers should do in this tough economy, said Matthew Yanni, principal of Yanni & Associates Investment Advisors, Franklin Park. Namely:

How close are you from retirement?

How will your expenses and spending habits change in retirement?

What is your comfort level with respect to investment risks?

"We think the market will remain volatile through early next year," Yanni said.

"Hold a certain amount of your portfolio in cash," said John Prescott, a business administration professor at the University of Pittsburgh Joseph M. Katz Graduate School of Business. "If people did that, they would not hurt as much."

Homebuilder Joe Costa, 66, of McCandless, shifted about three months ago from about 45 percent in liquid assets to about 70 percent. The stock market "confuses me to death," said Costa, who just hopes his 30 percent left in stocks will let him "earn a little money" when he retires soon.

The Petroskis, meantime, are putting all their business profits into cash. They are tightening their belts, especially as they worry about high health insurance costs.

"With five years to go before retirement, even if the stock market comes back, one more downturn would be devastating for people our age," Alex Petroski said.

"And we're being cautious about our spending," he said. "We'll still do Christmas, but we'll cut back in terms of spending."

Unretired: Retirees are Back, Looking for Work

Advice for Today’s Market? Diversify Wisely

Retirement strategy: CPA’s advice is don’t pay taxes now, pay later

Economic downturn especially rough on retirees

State residents will spend less this holiday season

Stocks: The Individual Investor’s Dilemma

Lawsuits filed to stop National City sale

2008-12-07T15:32:00.001-08:00

National City Corp. shareholders have filed about a dozen lawsuits in courts in Ohio, Delaware and elsewhere opposing the pending sale of the Cleveland-based bank to PNC Bank.

National City is being acquired by Pittsburgh-based PNC Financial Services Group Inc. for $5.6 billion. Shareholders of National City and PNC will get a chance to vote on the proposed sale at meetings scheduled for Dec. 23.

Former Ohio Attorney General Marc Dann is one shareholder who has asked a judge to grant an injunction delaying the sale. Dann, who resigned as Ohio's attorney general amid a sexual harassment scandal in May, says the sale price is too low.

Several lawsuits have been rolled into a class-action suit filed three days after the sale was announced in October.

National City CEO to exit bank after PNC deal

2 National City shareholders file lawsuits over sale

Dethroned Valu King returns

2008-12-06T15:15:00.007-08:00

Giant Eagle Inc. is using an old grocery-store name to test a concept that someday could compete with popular discount chains Save-A-Lot and Aldi.

A Valu King Food Market opened this week in the Cleveland suburb of Eastlake, in a former Tops supermarket that O'Hara-based Giant Eagle owns. The concept store is being run separately from the Giant Eagle stores, and at this point, the company said, there are no plans for Valu King outlets in the Pittsburgh area or elsewhere.

The no-frills Ohio store is stocking 6,000 to 8,000 value-priced items in a 28,000-square-foot space, much smaller than today's typical supermarkets. There is no pharmacy, bakery or deli counter, and no overnight hours.

The Valu King store, though, has fresh-cut meat and produce departments -- and shelves stocked with familiar Giant Eagle brands, such as Valu Time, Food Club and Top Care, among other labels. There is also a Dollar Zone, featuring 1,200 items under $1. And Valu King will accept manufacturers' coupons.

Erik Yorke, spokesman for the initial store, said a Youngstown, Ohio, grocery supplier known as Tamarkin Co. owned and operated several Valu King supermarkets in Ohio in the 1980s. Giant Eagle later acquired Tamarkin and inherited the stores, eventually converting them to the Giant Eagle name.

"To my knowledge, there hasn't been a Valu King since," Yorke said, although the new store's concept is much different from the old Valu Kings, which were traditional supermarkets.

He said there are no plans for more stores anywhere.

"We are looking at this really closely, and we hope it is successful -- that we can open further stores down the road -- but it is too early to tell," he said.

Both Save-A-Lot and Aldi -- with formats similar to the new Valu King -- have been boosting their store counts in the Pittsburgh area and elsewhere as consumers become more bargain-conscious. St. Louis-based Save-A-Lot has 23 stores in Western Pennsylvania. Batavia, Ill.-based Aldi has 31 stores in the region and a distribution center in Saxonburg.

Giant Eagle offers fuelperks! for online shopping

Focus Stock: Tough Times Favor Family Dollar Stores

State hiring workers to help the jobless

2008-12-06T15:15:00.005-08:00

At least someone's hiring.

The Pennsylvania Department of Labor and Industry plans to add 72 people to its payroll to help deal with unemployment benefit-related calls that have at times overwhelmed its eight call centers. That's in addition to 81 call-takers the department added as of last month. The combined 153 new employees will amount to a nearly 20 percent increase in the number of people fielding calls from the jobless.

Call centers likely will extend hours of operation, though the specifics of that plan haven't been worked out, said department spokesman David Smith.

So many people have called seeking information about unemployment benefits, many don't even get put on hold.

"The entire administration is attending to this problem, because people have been getting busy signals," Smith said. "There's nothing worse than getting a busy signal, particularly when you're calling about unemployment benefits."

The department's changes are an attempt to adapt to a state economy that, according to the federal Bureau of Labor Statistics, shed 40,000 jobs from May to October. Pennsylvania's 5.8 percent unemployment rate in October was 0.7 percentage points lower than the nation's, but state data for November won't be available until Dec. 18.

And November was brutal, according to the federal bureau.

Last month, the country lost 533,000 jobs, the biggest drop in 34 years and a rate of about 740 jobs lost every hour of the month. In all, 1.9 million jobs have been lost this year. The national unemployment rate rose by 0.2 percentage points in November, to 6.7 percent.

Lawmakers in Washington have responded to the deepening, year-old recession with an extension of federal unemployment benefits. The seven-week extension, for a total of 20 weeks, took effect last week. At the time, 54,000 people in Pennsylvania had used up their 13-week Emergency Unemployment Compensation, Gov. Ed Rendell said Nov. 25.

Because the state administers federal unemployment, the extension added to calls pouring into call centers, Smith said. The department usually adds a few dozen part-time workers to field calls this time of year, but the phone lines became a confluence for the newest victims of a plunging economy and those eligible for the extension.

Walk-in unemployment centers no longer exist, Smith said. The application process is handled over the Internet, by phone or by printing an application and mailing it.

Smith urged people to call later in the week, when call volumes typically drop off. Mondays and Tuesdays are the worst days, he said.

Congress to Detroit: What’s Your Plan?

Finding work tough assignment in bleak climate

No grinches in hiring here

Developer mulls buying Salvation Army building

2008-12-06T15:15:00.003-08:00

The Salvation Army is preparing for the move of its Western Division headquarters from Downtown to a 36,500-square-foot office building along the Parkway West this month.

At the same time, a local developer is said to be eyeing a deal to buy the nonprofit, Christian-based organization's nine-story headquarters building on the Boulevard of the Allies, and convert the site into student housing or some other educational use.

If that is the case, the Art Institute of Pittsburgh says it will be interested in a development that would serve its expanding student population.

About 75 administrative employees and other staff based Downtown will be moving on Dec. 22 to the two-story Building 4 at the Carnegie Office Park, said Salvation Army spokeswoman Ginny Knor.

The organization in January paid $3.3 million to acquire the building on a two-acre site at the Parkway and the Rosslyn Farms interchange. The structure has been renovated to prepare for the move.

"They liked the site because it a high-profile location with easy access to both Pittsburgh International Airport and Downtown," said Edward P. Doran, executive vice president of GVA Oxford, who helped broker the sale. "It also has ample parking."

The move is one of a series of changes the Salvation Army will make over the next several years to better serve communities in its 28-county territory.

Plans are to keep most of the social services offered at the Downtown headquarters building in place for the time being, although a family caring center will be moving to East Liberty, Knor said.

As the organization prepares for its move, a local developer recently contacted the Art Institute of Pittsburgh about housing some of its students at the 85,000-square-foot headquarters complex, said George Pry, the institute's president.

The institute houses students in three Downtown buildings, but those facilities are full, said Pry.

"It is a vintage building but more importantly, it is across the Boulevard of the Allies from the Art Institute and would centralize our housing," Pry said.

Pry declined to identify the developer, and Knor declined to comment.

Reed Smith snaps up space

The Housing Crisis Spreads to China

Equitable to move HQ Downtown

Downtown Reed Building tentatively sold

Pitt professors debate degree of recession

2008-12-06T15:15:00.001-08:00

The recent raft of troubling economic news had seasoned academicians searching for policy answers Friday and hoping the new government will strike the right balance.

"I think that in the near future, the issue of job creation will be the most volatile on the horizon," said John Delaney, dean of the University of Pittsburgh's Joseph M. Katz Graduate School of Business.

Delaney joined a half-dozen other Pitt faculty members who addressed the nation's tandem crises of jobs and credit, as well as what course the administration of President-elect Barack Obama should take.

Economists and policy makers were jolted yesterday by news that employers eliminated 533,000 jobs last month -- the deepest employment cuts in 34 years. That made November the 11th straight month with job losses, while October's reductions were revised to 320,000 from 240,000.

"There will be a lot of pressure for government job creation, whether it's a WPA program or something else," especially as the economy "starts to cycle down," said Delaney.

The WPA, or Works Progress Administration, was a Depression-era program that created millions of jobs nationally between 1935 and 1943.

The seven business professors yesterday differed about how long and deep the recession will be.

Jaffer Qamar, visiting professor of finance, doubted the downturn would "be very deep" or last more than another 12 months.

Economics professor Josephine Olson, though, was "not as optimistic." She envisioned a deep recession like that of the early 1980s because consumer spending has plunged and exports, formerly a bright spot, are slowing with the sluggish global economy.

"The problem is a tremendous lack of confidence," said Jay Sukits, assistant professor of business administration, who was reluctant to characterize the recession. "No one wants to lend to the next entity that's going to go bankrupt."

Sukits said that lack of confidence and the resulting freeze in credit stem from the lack of transparency in pools of mortgages that were packaged into securities in the last 10 years. Owners of the mortgage-backed bonds too often did not know the default rates on the underlying home loans and thus, no one could properly value the securities, he said.

"The genesis of the crisis was the total abdication of fiduciary duties by Fannie Mae and Freddie Mac (mortgage-lending giants) and Moody's and Standard & Poor's, who rated those securities," said Sukits.

Ratings agencies were assigning premium-grade "AAA" ratings to mortgage-backed securities, when "what they actually were were junk bonds," he said.

The Obama administration should not rush to reregulate the securities industry, Sukits said.

"Overregulation of the capital markets has never worked in the past," said Sukits.

Qamar said the next administration should focus more on the credit needs of smaller companies. They tend to generate the most jobs, he said, but are the first to lay off during tough times because their credit terms tend to be the most tenuous.

Region’s financial experts clash on need for bailout

The Bailout: What Does Paulson Do Now?

Mortgage market warms up

Specialty stores succeed with expertise, unique goods

2008-12-05T12:55:00.007-08:00

Never mind the troubled economy. DeLallo's Italian Marketplace is as busy as usual for this time of year, as families plan Christmas dinners and shoppers buy gift baskets filled with pastas, cheese and sauces.

"We're doing very well. Our store is a destination for holiday shopping," said Anthony DiPietro, vice president of the Jeannette-based business. "Food is something that people don't sacrifice at holiday time, because it's something that brings people together."

As national store chains report sharp declines in sales and experts predict frugal spending this season, many of the region's small, specialty merchants that carry hard-to-find items say they're doing as well as or better than last year.

Customers at Carol's Needleworks in Bridgeville tell owner Carol Crowley they're making more handmade gifts this year, to save money. Yarn and needle sales are up, as is enrollment in her classes.

She's selling more of the items she makes to sell in the store. "Yarn is comforting, and people cocoon" during tough times, Crowley said Thursday, adding craft supply store chains are carrying less yarn, and that helps her business.

Riding jackets and equestrian-style clothing and home items are selling better than this time a year ago at The Horse and the Hound in Butler, owner Diane Weber said.

November sales were down, likely because a competing shop was closing and selling off stock, Weber said, but "December is picking up."

While small retailers can't discount as deeply or offer as much variety as big box stores, they can hold their own as consumers spend less by promoting their personal touch and expertise, as well as their unique merchandise, said Tony Gao, a marketing professor and retail expert at Northeastern University in Boston.

"In today's environment, your most loyal customers will give you more support than one-time customers," he said.

Chris Mollica of M&M Leather Goods said small businesses are "expected to do things better" than big ones, and many have become more competitive in price because they adjust more easily to their small markets.

One man bought three jackets yesterday at the Hempfield store that sells motorcycle-related clothing. Mollica, the vice president, threw in a can of water and stain repellant spray. "A big box wouldn't do that," she said.

Still, shoppers are being more careful. Instead of one shopper buying a coordinating men's shirt, sweater and pants at his Lapels A Fine Men's Clothier, Kevin Miscik observes family members splitting up the outfit, with each one buying one piece.

Miscik relies on the holidays to generate 40 percent of annual sales at his downtown Greensburg store, and so far his numbers are steady. This year, shoppers are looking for fewer, but better quality gifts, he said.

"One woman bought her husband a beautiful winter coat, for several hundred dollars. She didn't buy him five things," he said.

The principle applies as well to a pair of work boots as it does to a cashmere sportcoat.

Family members buy gifts at Hanna's Clothing Store in Carnegie for construction and other professionals who work outdoors, Phil Hanna said, because the clothing holds up and can be personalized with embroidery.

"This area isn't as depressed as the rest of the country," he said, and hundreds of laborers and tradesmen now are employed at the North Shore casino and transit tunnel construction sites, along with road projects. "As long as those guys are working, I'm busy," he said.

Mollica of M&M said more customers are using cash instead of credit cards, though sales have been strong. Manager Rena Agostinone of D's Six Pack, with locations in Regent Square and Monroeville, hasn't seen any drop in specialty beer sales, including mix-and-match six packs that are popular gifts.

Jack Miller had a "good year, despite the economy" at his Strawberry Crow shop filled with specialty furnishings and home items in Ligonier. The town is a destination tourist area, and that helps, he said.

Still, smaller shops in Sewickley have suffered in recent months as shoppers become more frugal, said Janet Daugherty of Tapas Inspired Handworks, which sells baby clothing and other handmade items by 150 crafters and artists.

"I see a lot of people looking, but not buying," she said. "This is one of the worst years in the 18 years I have been in business."

Loyal customers continue to visit her for gifts, including Dorothy Antonelli, who just bought jewelry there for two nieces and a granddaughter. She lives on Neville Island, not far from the Sewickley business district.

"I try to frequent the local people. I think it's important. You want to see them stay in business," she said.

The Rise of the Super-Discounters

Holiday shoppers lean toward gift cards

$1 gallon of gas possible soon, Gulf chief says

2008-12-05T12:55:00.005-08:00

Gasoline prices may fall to $1 a gallon by early next year, Gulf Oil CEO Joe Petrowski said this week.

Oil prices, which rose to a record $147.27 a barrel in July, were driven up by speculators, and "there is a chance the market will overshoot on the way back down," resulting in much lower prices at the pump, Petrowski said during a talk in Newton, Mass.

Gulf Oil's headquarters left Pittsburgh in the 1980s when it was acquired by Chevron Corp., and its current incarnation, Chelsea, Mass.-based Gulf Oil LP, is a petroleum wholesaler that has been working to build a network of franchised stations.

Gulf distributes fuels to about 1,800 branded service stations in the Northeast, including about 35 in the Pittsburgh region that carry the familiar orange logo -- once a much more prominent sight along local roads.

Petrowski said that oil, which settled at $43.67 a barrel today, may fall to $20 a barrel. Average gasoline prices nationwide slipped under $1.80 a gallon yesterday, a four-year low.

Just four months ago, crude oil prices shot close to $150, and the average, per-gallon cost to consumers was more than $4. Crude has fallen nearly $27 in one month.

Petrowski became Gulf's CEO in 2005 after more than 20 years with other energy companies. He correctly predicted on Oct. 14, 2007, that oil, then trading at $83.69 a barrel, would rise to $100 within six months.

He said the price of oil should range from $40 to $60 a barrel, depending on economic activity, in order to keep pace with inflation.

Cheaper Gas Prices, but Less Demand

Oil at $80 a Barrel?

Union Trust lands retail tenant

2008-12-05T12:55:00.003-08:00

First Commonwealth Bank has become the first new retail tenant to take a spot at the landmark Union Trust Building since California-based Mika Realty purchased the building 11 months ago.

The Indiana, Pa.-based bank will relocate its Downtown branch on Smithfield Street to expanded space at the corner of Grant and Oliver streets, said Eric Renner, executive vice president, consumer services.

A date hasn't yet been set, but the move could take place this spring, said bank spokesman Rich Stimel. First Commonwealth has 114 branches in 15 counties.

"This will be a larger branch in a marquis location. It's exciting for us to be on Grant Street, and we believe this will help us grow our Downtown business," Renner said.

CB Richard Ellis/Pittsburgh, a Downtown-based commercial real estate firm, hopes to attract as many as 12 new retailers to the 11-story Grant Street building, which was left largely vacant after Mellon Bank Corp. (now Bank of New York Mellon Corp.) moved its personnel to other locations several years ago.

The Mika-led group purchased the Union Trust Building for $24.1 million in February. In October, the group landed its first major office space deal in Siemens Power Generation Inc., which recently completed moving 500 employees into 185,000 square feet on four floors, said Jeremy Kronman of CB Richard Ellis, who is heading the office leasing effort.

"We are very pleased that First Commonwealth Bank has chosen to relocate their downtown branch to the Union Trust Building," said Hugh "Herky" Pollock, retail broker with CB Richard Ellis. "In most markets and in this economy, banks are consolidating; this is both a validation of the strength of our location and the vitality of our local economy."

First Commonwealth will join Larrimor's, the upscale clothing retailer located on the corner at Grant Street and Fifth Avenue. An office of Manpower Inc., an existing first-floor tenant, plans to open a newly designed office and move to another space within the complex, Pollock said.

38,000 job cuts deepen economic gloom

2008-12-05T12:55:00.001-08:00

A round of more than 15,000 layoffs announced Thursday by AT&T Inc., DuPont and Viacom Inc. suggests a yearlong wave of job cuts is accelerating, just as the government is expected to report a higher unemployment rate for November today.

Swiss bank Credit Suisse Group announced 5,300 job cuts, although it's unclear how many will be in the United States.

The latest layoffs coincided with a government report showing the proportion of workers continuing to receive jobless benefits has matched a level last reached in September 1992. The deepening recession is pressuring companies to slash costs, and payroll is typically the quickest and most efficient way to do it.

The job cuts spanned an array of economic sectors, hitting telecom workers, bankers, salespeople and chemical manufacturers. The breadth of the layoffs suggests the pain of the recession will be felt broadly and well into 2009.

Dallas-based AT&T plans to cut 12,000 jobs, about 4 percent of its work force. The nation's biggest telecommunications company said the job cuts will begin this month and continue throughout 2009.

Wilmington, Del.-based chemical company Dupont will cut 2,500 jobs and cut back hours for remaining workers. It plans to eliminate 4,000 contractors this month, with more contractor cuts in 2009.

New York-based media conglomerate Viacom will cut about 850 jobs, or 7 percent of its work force.

Credit Suisse's 5,300 planned job cuts worldwide represent about 11 percent of its work force.

The layoffs announced yesterday follow others earlier this week. JPMorgan Chase & Co. said it plans to cut 9,200 positions at Washington Mutual, which it acquired. Jet engine maker Pratt & Whitney, a subsidiary of United Technologies Corp., laid off about 350 employees across the country Wednesday, the same day software maker Adobe Systems Inc. said it will cut 600 jobs, or about 8 percent of its work force.

Citing difficult economic times, law firm Reed Smith in Pittsburgh eliminated 115 support staff jobs across the United States. Fewer than one in five of the positions, or about 20, were at the Downtown headquarters, where Reed Smith employs about 600, including 213 attorneys.

Managing partner Greg Jordan told the firm's employees in an e-mail message that the firm "must plan for reduced demand for our services in 2009 and align our capacity accordingly." The job cuts include positions in information technology, finance, marketing, administration and human resources.

Tuesday, U.S. Steel Corp. said it will temporarily consolidate steel production at its Mon Valley Works and mills in Indiana, Alabama and Ontario, laying off about 3,500 employees at out-of-state mills and mines.

The consolidation "is a necessary response to current market conditions," U.S. Steel CEO John P. Surma said.

With just those announcements, more than 38,000 job cuts occurred this week.

"What we have seen is not just that the cuts are deep; it's that they are happening everywhere," said Andrew Gledhill, an economist with Moody's Economy.com. "It just tells you that there are very few people in any industry who can say, 'I feel safe.' "

Growing job insecurity dampens the economy in ways that go beyond those laid off, Gledhill noted. Anxious families, even those with jobs, rein in their spending. Because consumer spending accounts for roughly 70 percent of U.S. economic activity, a pullback in spending typically leads companies to cut even more workers to trim costs.

"The prospect of losing your job is what scares people," said George Whalin, president of Retail Management Consultants in San Marcos, Calif.

Nervous consumers have cut back on spending, making November the weakest shopping month since at least 1969, according to retail figures released yesterday by the International Council of Shopping Centers. This week's layoffs could accelerate the pullback.

"It just adds to the concern that consumers are going to have about the future," Whalin said. "I don't know if anyone has any positive spin on this. I wish there was."

For the thousands of newly laid-off, the timing of the latest job cuts, just a few weeks before the holiday season, is compounding the pain.

"It's kind of unusual -- companies don't like to lay off people at Christmastime," said Robert Whelan, senior economist with the ECONorthwest consulting firm in Portland, Ore. "What's happened is that too many companies have been caught short. They can't get credit, business has fallen, and they don't have a choice."

BNY Mellon to slash 1,800 jobs

Job One for McCain or Obama: Jobs

Congress to Detroit: What’s Your Plan?

UPMC says operations OK despite need for layoffs

Pressure Builds for Boeing and Machinists to Settle

Region again counters trends, adds 5,000 jobs

2008-12-04T15:21:00.007-08:00

The Pittsburgh region once again bucked state and national trends, adding 5,000 jobs in October while the state lost 17,000 and the nation shed 240,000 jobs, according to figures released today.

"This is an indication of an economy that is in pretty good shape. So far, we're just dodging that bullet. We didn't have the (economic) boom, and we don't have a bust," said Jake Haulk, an economist and president of the Allegheny Institute for Public Policy, a think tank in Castle Shannon.

An increase of 4,900 service-providing jobs helped boosted the Pittsburgh region's nonfarm jobs count to 1,164,100 in October, the second consecutive month of increases in jobs in the seven-county region, the state's Center for Workforce Information and Analysis said.

The region, which consists of Allegheny, Armstrong, Beaver, Butler, Fayette, Washington and Westmoreland counties, had 7,600 more jobs in October than in October 2007.

Despite the increase in jobs, the region's unemployment rate increased in October by 0.1 percentage point to 5.5 percent, from 5.4 percent in September. The increase came as the number of jobless residents increased in October to 67,400, from 65,500 in September.

The jobless rate was a full 1 percent higher than the 4.5 percent in October 2007 but was below the state's rate of 5.8 percent and the national rate of 6.5 percent in October.

The Pittsburgh region seems to lag 10 months behind a national recession that economists say began in December 2007, Haulk said.

The high concentration of jobs in health care and education seems to be carrying the economy, even in times of a recession, said Harold D. Miller, president of Future Strategies LLC., a Downtown consulting firm. A diversified economy has helped the region, Miller said.

Despite the overall increase in jobs, Robert Dye, vice president senior economist for PNC Financial Services Group Inc. in Pittsburgh, pointed out the report shows 4,000 jobs were added by school districts and government education services, while another 2,100 were added by colleges and universities.

"We have to look at the month-to-month changes with a little skepticism," Dye said.

The manufacturing sector, which employed 99,000 in October, down slightly from 99,300 in September, is holding up reasonably well, despite the economic downturn, Dye said.

There might be even an increase in the number of manufacturing jobs if employers could find the skilled workers to fill vacancies, Miller said.

Although the Pittsburgh area looks like it is doing better than the rest of the country, it will not escape the effects of the recession, Dye said.

"I expect to see job losses in the next few months, but below the national average. Recessionary forces are working to such an extent that virtually no part of the country and no industries will be immune," Dye said. The nation is entering a new stage of the recession, and Dye predicts the economy will not hit bottom until mid-2009, regardless of what the new administration does.

Region bucks trend on jobs

The Great Inflation Debate

Citizens Bank parent taken over by British government

Jobs decline in state

Alcoa scrambles to stay viable

2008-12-04T15:21:00.005-08:00

Alcoa Inc., which had been counting on obtaining discarded aluminum assets from a merged BHP Billiton and Rio Tinto PLC, has fewer strong options to improve its prospects amid one of the worst aluminum markets in decades now that the deal has collapsed.

With aluminum inventories just shy of record levels, prices at their lowest level in 2008 and nearly half of the world's aluminum production unprofitable, Alcoa is scrambling to cut capacity and find buyers for some of its downstream businesses, which is proving more difficult given the tight capital markets and reluctance of many companies to take on debt.

Neither of those efforts, however, addresses the company's fundamental challenge: Alcoa remains the high-cost producer of the world's major aluminum makers when compared with Rio Tinto's Alcan and Russia's United Co. Rusal. Knowing that BHP wasn't keen on the aluminum market, Alcoa had been hoping to buy all or part of Alcan, which has lower energy costs, after BHP bought Rio Tinto.

With that prospect off, speculation is mounting that Alcoa will look at other avenues.

"Everybody understands the current economic situation in the world" requires certain steps, said Alcoa spokesman Kevin Lowery. "In the interim, we are taking steps to reduce costs and taking steps to position ourselves so we will be stronger than competitors. That is what we are focusing on."

John Tumazos, an analyst with Very Independent Research, said the company has few good options as its influence in the commodities world is nowhere as solid as it once was. "They need to idle more smelters than they have cut," he said.

So far, Alcoa is keeping a lid on its options, but industry observers say it could deepen its existing relationship with its partner Aluminum Corp. of China, also known as Chinalco. The two companies own a 9 percent stake in Rio Tinto that they jointly purchased for $14 billion in January. The stake is valued at about 80 percent less since BHP's planned takeover of Rio collapsed last month.

Alcoa could increase its existing stake, betting on a rise in commodity prices. It could sell its stake, which would bring about $200 million in cash to its coffers and represent a huge loss from its initial $1 billion investment.

The two companies could combine into a single entity. Such a deal, while in no way an easy task because it would result in Chinese ownership of a key U.S. company, could work for both sides. A combined Alcoa and Chinalco would make it one of the biggest producers of aluminum and both alumina and bauxite, necessary ingredients for aluminum production.

In addition, a combined company would be able to better rationalize expensive smelters and other production facilities in Europe, the United States and China, leaving just the lowest-cost facilities to compete with Rio Tinto and UC Rusal.

Tumazos said Alcoa's sagging stock price, which is hovering around $10, makes the company a fairly inexpensive purchase. "Chinalco could buy Alcoa for about $8 billion plus a premium," he said. "That is less than it paid for a stake in Rio."

Citizens' parent company could go on block

2008-12-04T15:21:00.003-08:00

Analysts say Royal Bank of Scotland's operations in the United States could be put up for sale if the bank's new owner -- the British government -- decides that the ailing institution must sell assets to raise cash.

Citizens Financial Group, of Providence, R.I. -- parent of Citizens Bank of Pennsylvania -- could draw bids of up to $14 billion, Gerard Cassidy, a banking analyst with RBC Capital Markets, believes.

"Citizens has about $97 billion in deposits, so with a deposit premium between high single-digits and 13 percent or 14 percent, you're looking at a range of about $7 billion and $14 billion," Cassidy said.

Citizens Financial Group offers a potential acquirer a branch network stretching from the Northeast through the Midwest. Unlike many American banks, however, it wasn't financially pummeled with a portfolio of bad mortgages.

Citizens has 128 branches in the Pittsburgh region, second behind National City Bank's 158. Citizens holds about 8 percent of the region's consumer deposits, making it the region's fourth-largest bank. Citizens came to Western Pennsylvania in 2001, when the Royal Bank of Scotland acquired then-Mellon Financial Corp.'s retail banking business.

Citizens spokesman Michael Jones couldn't be reached for comment Wednesday.

Merrill Lynch & Co. also believes Royal Bank of Scotland might sell Citizens Financial to buy back shares from the government.

Selling Citizens "would provide RBS with a significant opportunity to shrink its balance sheet, and we think that the capital freed up could be used to buy back and cancel the U.K. government preference shares," analysts, including Manus Costello, wrote in a research note to clients.

The sale is "one of the most likely" over the next 18 months, Costello said.

"We anticipate that the British government will mandate the Royal Bank of Scotland shrink the size of its asset base within the next 12 to 36 months," Cassidy said. Last month, the British government acquired 57.9 percent of the bank's common shares, plus a block of preferred shares for about $31 billion.

Cassidy said he doesn't believe the U.S. operations would be the first piece of the Royal Bank to be divested.

"We see the expected sell-off of the riskiest businesses," he said.

Royal Bank also might sell the company's Bank of China stake, its insurance businesses, form a "bad bank" for structured credit assets and run down its global banking and markets division, Merrill Lynch's Costello said.

Citizens Financial in 2007 contributed about $2.6 billion of Royal Bank of Scotland's $20 billion in pre-tax profit, and 8 percent of its $53 billion in revenue.

"However, in a distressed financial market like we are in now, sometimes you have to sell off the most saleable assets, and if the British government says it wants the bank's franchise pulled back to the U.K., and the Continent, and perhaps South America, then Citizens could be put up for sale," Cassidy said.

An unidentified British analyst told American Banker yesterday: "I think the government is much more interested in seeing RBS focus on being a U.K. company than it is in the international ambitions of RBS." The analyst also told American Banker that Royal Bank of Scotland probably would wait until late next year to sell Citizens to get the best price.

Cassidy said there are five banks that would put money on the table for Citizens Financial, including:

Citigroup Inc., still smarting from losing Wachovia Corp. in October to Wells Fargo & Co.

Financial services firm Morgan Stanley, which in September was approved by the federal government to become a bank-holding company

Toronto, Ontario Canada-based TD Banknorth

Spain's Banco Santander

Buffalo, N.Y.-based M&T Bank Corp.

Under Fred Goodwin, who stepped down after eight years as Royal Bank of Scotland's CEO last month, the financial institution was an aggressive acquirer, spending some $90 billion to buy banks. Among Goodwin's buys were Mellon's retail business in 2001 for $2.1 billion; Cleveland's Charter One Financial Corp., acquired in 2004 for $10.5 billion; and last year's $18.6 billion deal to purchase the part of ABN Amro Holding NV.

Goodwin greatly overpaid for ABN Amro, analysts say, and it was responsible for much of Royal Bank of Scotland's loan losses and eroded capital base. Royal Bank lost $1.5 billion in the first six months of this year.

"I think Royal Bank's new CEO (Stephen Hester) will come out with his strategy within the next three to four months," Cassidy said.

Britain’s Big Banks Bailout

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New rules won't affect National City payouts

2008-12-04T15:21:00.001-08:00

About $200 million coming the way of executives of National City Corp. after a government-assisted takeover by PNC Financial Services Group's is likely to pass legal muster, analysts and compensation experts believe.

As disagreeable as the so-called "golden parachute" compensations for officials of troubled National City may be to some critics of the banking companies' $5.6 billion merger deal, it's unlikely they would be affected by new Treasury Department rules designed to limit such payouts in mergers using government "bailout" funds, the experts said.

PNC, which had hoped to complete the merger by Dec. 31, is obligated to pay the money because of agreements that National City executives had in place if their employer was acquired.

As reported Wednesday by the Tribune-Review, a new securities filing Tuesday indicated that at least 21 -- and as many as 50 -- executives are covered by such agreements at troubled National City, whose stock has dropped about 85 percent this year, hurt by years of subprime lending.

A major reason that the Treasury Department would not object to the payments is that Pittsburgh-based PNC --not Cleveland-based National City -- will be the recipient of the government assistance facilitating the deal, said Gerard Cassidy, an analyst at RBC Capital Markets of Portland, Maine.

The funds are being provided under the Treasury Asset Relief Program, known as TARP, which was set up under the government's $700 billion financial-rescue plan.

"NatCity hasn't received any such funding, so I don't believe there will be any restrictions on the severance packages," said Cassidy, who follows both banks.

"Additionally, these severance packages were signed years ago. The executives have a contract, and I don't believe the Congress can break these contracts because they are already in place."

Such deals are common practice on Wall Street, and the $200 million due to executives is not that large in comparison to those at other companies, said Laurence Wagman, of James F. Reda & Associates, a New York-based compensation consulting firm.

Wagman said he also believes there will be no government objections to the National City packages, but in the face of growing public pressure, companies might start to pull away from such deals in the future.

"The size of some of these payouts have been quite extraordinary -- and that's gotten Congress' attention, it's gotten the media's attention, and it's gotten shareholders' attention, so there has been a lot of movement to discourage this," he said.

"These deals are common, but are they a good thing? Every situation speaks for itself," Wagman said.

Contacted yesterday, a National City spokesman had no comment on the new filing. Treasury representatives could not be reached.

The PNC acquisition drew new opposition this week from Rep. Dennis Kucinich, D-Cleveland, who said the deal might endanger thousands of jobs in northern Ohio and distort competition in U.S. banking.

Kucinich wrote a letter to the Federal Reserve opposing the takeover of National City, which is Ohio's largest bank. PNC hasn't said when it will discuss job cuts as it seeks $1.2 billion in pretax cost savings from the merger, said Fred Solomon, a spokesman for the Pittsburgh-based bank.

Kucinich and Rep. Steven LaTourette, a Republican from suburban Cleveland, who has criticized the transaction, discussed the merger Tuesday with regulators. The two lawmakers met with such officials as Neel Kashkari, who heads the Treasury's bank equity-purchase program, and Timothy Long, chief national bank examiner for the Office of the Comptroller of the Currency.

Neither LaTourette nor Kucinich could be reached for comment.

PNC has agreed to sell $7.7 billion in preferred shares and $1.1 billion in warrants to the U.S. Treasury after regulators urged National City to seek a merger partner.

Among the nation's 20 largest banks, National City and Wachovia Corp. are the only ones that aren't participating in the Treasury's effort to boost capital and spur lending. Wells Fargo & Co., the seventh-largest U.S. bank, is acquiring Wachovia, the fourth-largest lender.

"Treasury is using the people's money to cause the failure of (National City), with a detrimental effect on Main Street Cleveland," Kucinich said in his letter.

Companies can re-write compensation contracts to prevent golden parachutes when they are receiving bailout funding, said Cassidy.

"I would expect this to go through," he said. "Certainly there would be criticism by politicians and such, but this is standard procedure that many companies have written into their senior-executive contracts in case of a change of ownership," Cassidy said.

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National City deal worth $200M to executives

2008-12-03T15:37:00.011-08:00

Senior executives and others at National City Corp. will take home about $200 million after PNC Financial Services Group takes over the troubled institution, according to a filing Tuesday with the Securities and Exchange Commission.

PNC is obliged to pay the money because of agreements National City executives had in place if their employer was acquired.

PNC agreed to acquire the Cleveland-based bank -- the nation's eighth-largest -- on Oct. 24 for $5.6 billion in stock in what analysts describe as a bargain. The government-assisted deal is expected to close by Dec. 31 but might take longer to complete, said the securities filing.

"In this climate, it's troubling to see $200 million being paid in golden parachutes," said Mike Lapham, director of the Responsible Wealth project at United for a Fair Economy, Boston.

National City stock has dropped about 85 percent this year, hurt by years of subprime lending. To conserve capital, the bank slashed its dividend to one penny a share in April, but it was already being scrutinized by potential acquirers.

To fund the merger, PNC will use $7.7 billion it received from the Treasury for selling the government preferred shares. The stock sale is part of the government's program to strengthen financial institutions.

"(National City) is essentially run into the ground, and then for executives to be rewarded with taxpayer money is certainly troubling," Lapham said.

It was not clear how many National City executives and officers would split the approximately $200 million.

But documents indicate at least 21 and as many as 50 executives are covered by such agreements.

Also unclear is whether the Treasury's restrictions on executive pay at banks receiving government money apply in this case.

"If there's government money involved with this deal to make it possible, hopefully, Treasury's regulations apply," Lapham said. "But the regulations they put out are somewhat limited and fairly vague. So that remains to be seen."

National City CEO Peter Raskind and two other top executives would divide about $41 million in golden parachutes once PNC acquires National City, the Plain Dealer of Cleveland reported in late October.

A PNC spokesman referred questions to National City, whose spokesmen could not be reached yesterday.

The merger will make PNC the fifth-largest bank in the United States, with $181 billion in deposits -- $85 billion from PNC and $96 billion from National City.

In addition, PNC will receive about $725 million in corporate income-tax credits it can use to offset future tax bills. The credit stems from the $19.9 billion PNC expects to lose over time from bad loans PNC will acquire from the bank, plus a recent tax ruling by the Internal Revenue Service that allows such credit from bank deals.

In the meantime, PNC and National City are assessing their respective personnel, offices, equipment and other assets "where they may take advantage of redundancies," said the filing.

PNC expects to wring about $1.2 billion in combined costs from the deal, it said.

Over the next 26 months, it will cost PNC about $500 million to integrate the two banks, including $228 million to convert branches.

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U.S. Steel to merge factory output

2008-12-03T15:37:00.009-08:00

Reacting to the downturn in steel demand, U.S. Steel Corp. said late Tuesday it temporarily will consolidate steel production at its Mon Valley Works and mills in Indiana, Alabama and Ontario, laying off about 3,500 employees at out-of-state mines and mills.

The consolidation "is a necessary response to current market conditions," U.S. Steel Chief Executive John P. Surma said.

Pittsburgh-based U.S. Steel said it made the decision after a continuing review and analysis of market conditions and their impact on customers' orders, but gave no details.

In addition to concentrating production at its Mon Valley Works -- which consists of the Edgar Thomson plant in Braddock, the Irvin plant in West Mifflin, the Clairton coke plant and a mill in Fairless Hills, near Philadelphia -- the steelmaker will be using its plants in Gary, Ind., Fairfield, Ala., and Nanticoke, Ontario.

U.S. Steel spokesman John Armstrong said the company would not comment on how much production would be reduced by temporarily consolidating operations.

The facilities that are to be temporarily idled over the next several weeks are Keetac, an iron ore mining and pelletizing facility in Keewatin, Minn.; the Great Lakes Works near Detroit, Mich.; and the Granite City Works near St. Louis.

This is the second round of layoffs at U.S. Steel in less than a month. On Nov. 13, the company said it would lay off about 500 workers in the United States, including about 78 at its Edgar Thomson and Irvin plants, because of weakening customer demand. It also furloughed 177 workers in Canada.

Armstrong said the 78 local workers could be recalled if customer demand increases.

Arcelor Mittal said last month it might cut about 16 percent of its U.S. work force because of lower steel demand in key markets, including the automotive market. The company said it was considering cutting about 2,400 jobs from its Burns Harbor, Ind., plant.

U.S. Steel curbs production

Tollgrade rejects unsolicited buyout bid

2008-12-03T15:37:00.007-08:00

Tollgrade Communications Inc. of Harmar has rebuffed an unsolicited buyout bid worth as much as $79.4 million, saying in a securities filing Tuesday that the offer undervalues the telecommunications company.

Bradford Capital Partners' buyout bid valuing Tollgrade stock in a range from $5.50 to $6 per share doesn't reflect the strength of the company's cash position, the long-term value of its business or potential benefits of a new business strategy, Tollgrade CEO Joseph A. Ferrara said in a letter to the Aspinwall-based investment company.

Tollgrade's management and its new business strategy have the full support of its board of directors, Ferrara wrote in the letter filed yesterday with the Securities and Exchange Commission.

Tollgrade, which has about 260 employees and makes test equipment for telecommunications and cable networks, said the letter basically repeats the substance of its Nov. 24 letter to Bradford Capital, the company's largest shareholder. Tollgrade wrote that letter in response to Bradford Capital's Nov. 18 buyout offer.

Tollgrade shares closed at $4.91 yesterday, up 16 cents, or 3.3 percent.

Tollgrade spokesman Robert Butter said the company's cash on hand alone is close to the offer price. Tollgrade had $61.2 million in cash at the end of the third quarter, and spent $480,000 of that amount on its planned $15 million stock repurchase plan, the company said in its third-quarter earnings report.

Butter declined to elaborate on the company's statement. Neither Steven J. Lynch, president of Bradford Capital, nor Martin Calihan, an agent for the firm, could be reached for comment yesterday.

Bradford Capital, which owns about 11.7 percent of Tollgrade's stock, has participated in venture capital investments and engages in acquisition and development of entrepreneurial businesses.

Under Pennsylvania corporation law, Tollgrade's board has the right to reject an offer it considers not in the best interest of the company, the employees or the community, said attorney Richard D. Rose, co-chairman of the mergers and acquisitions group for Buchanan Ingersoll & Rooney P.C., Downtown.

To fend off an unwanted takeover, the targeted company could file a lawsuit against the suitor, which would provide it with some time to mount a defense, said Ravi Madhavan, associate professor of business administration at the University of Pittsburgh's Katz Graduate School of Business.

"The corporate lawyer's toolkit is rather full," Madhavan said.

Tollgrade could restructure and sell some of its assets, turn to a friendly buyer in the form of a "white knight" or even attempt "greenmail," which is offering to repurchase the unsolicited bidder's stock at a higher price, Madhavan said.

"You are essentially paying them to go away," Madhavan said.

If Tollgrade's board had accepted the offer, Bradford Capital could have negotiated terms of the buyout and conducted its due diligence before buying Tollgrade, Rose said.

But now, Bradford Capital could continue its pursuit of a Tollgrade takeover by mounting a tender offer to the shareholders, Rose said. In order for that tender offer to succeed, Bradford might have to raise its offering, Rose said.

Shareholders would be better served by the company following a more focused business strategy, rather than a sale of Tollgrade, Ferrara told financial analysts recently. The company is focusing on providing software services for telecommunications providers.

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Highmark system lets patients know costs upfront

2008-12-03T15:37:00.005-08:00

Highmark Inc. has started a claims processing system that can let patients know what their out-of-pocket costs will be as they go for X-rays or other medical services.

The Downtown-based insurer said its new real-time system debuted Nov. 10 and will be available for use by mid-February at 250 hospitals, physicians' offices, imaging firms and other providers. By April, Highmark plans to have real-time claims processing in place at all the care providers it works with in 49 Pennsylvania counties.

While insurers and care providers have provided prices in advance for years, Highmark's system gives more detail.

A Highmark member suffering from wrist pain, for example, who is advised by a family physician to get an X-ray can arrive for the scan, then find out the cost from the provider.

The medical testing center can use Highmark's Web site to estimate within seconds what the patient will pay, and if the test or procedure already has been done, it can submit the claim.

"If the service has been provided, we potentially can at that moment collect out-of-pocket expenses from the patient," said Mary Lou Bradley, business manager for Weinstein Imaging Associates, one of the area's largest imaging firms and one of the first businesses to sign up for Highmark's system. Weinstein has offices in Shadyside, Scott and McCandless.

One health care consultant said the system and similar ones planned by other insurers could give consumers more choices, and perhaps lower patient costs.

"This system shows a patient's liability right up front," said Gerald Katz, a Philadephia-based health care consultant with Kurt Salmon Associates.

"Right now for patients, prices are a crapshoot. You wait six weeks until you get a bill in the mail. Now, a patient could say 'I'll live with that pain a while longer.'"

Robin Bugni, Highmark's Strategic Products director, said the company is "helping our members understand their actual out-of-pocket costs, when they schedule and receive services."

The real-time system primarily is designed to help Highmark members who have opted for high-deductible plans, or have other types of cost-sharing attached to their policies. About 730,000 Highmark members in Pennsylvania are in such plans.

Care providers also like to know up front what amount the patient is likely to have to pay. "Providers want this type of service, so they don't have to chase the member for the fee," said Joe Mondy, assistant vice president of information technology communications for insurer Cigna.

Mondy added that Cigna has been piloting a system for about 18 months that will give payment estimates up front. The system will re rolled out nationally early next year.

The Highmark system also leaves open the possibility of care provider and customer negotiating, should the patient weigh pain versus cost and decide to tough it out.

"Our policy generally says that providers should collect the member's liability, but should a patient back out of treatment, the provider could offer options," Bugni said.

"In the example of the hurting wrist, perhaps the provider would tell the person to ice it or put heat on it, or recommend some other treatment. If the pain became too bad, the X-ray could be rescheduled."

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PPG spinoff to shutter 3 sites

2008-12-03T15:37:00.003-08:00

Stalled auto sales pushed Pittsburgh Glass Works to announce the closing of one manufacturing facility and two assembly plants early next year, plus layoffs of 150 salaried employees across North America, the company said Monday.

A former PPG Industries Inc. business, Pittsburgh Glass Works operates a windshield manufacturing plant in Creighton, which employs nearly 200. It is not affected by the restructuring moves.

"This realignment will enable us to adapt to the changing demands of the industry," said President Jim Wiggins.

The company will close assembly plants in Newark, Del., and Cambridge, Ontario, in late 2009. It also will shut down its glass fabrication plant in Oshawa, Ontario, in the first quarter.

It said two more plant shutdowns would be identified after a business analysis is completed in January weighing capacity against projected demand, said Richard Heilman, vice president. He could not say how many salaried workers were laid off locally.

North American auto production of 15.7 million vehicles in 2007 is expected to drop to 12.8 million units this year and to about 11 million in 2009, he said.

The company has nine plants in North America, including plants in Meadville, Crawford County, and Tipton, Blair County. They are not immediately affected, said Heilman.

Pittsburgh Glass Works, which employs about 4,100 people, is 40 percent owned by PPG . It spun off 60 percent of its automotive glass-making business in October to Kohlberg & Co., a private equity firm in Mt. Kisco, N.Y.

The company is headquartered Downtown in former PPG office space. It has engineering and research operations in Harmar, also sharing PPG space. Pittsburgh Glass Works employs about 200 between the two locations.

Officials at United Steelworkers Local 12-G, which represents 180 employees at the Creighton plant, could not be reached.

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Key rate may be cut to zero

2008-12-03T15:37:00.001-08:00

AUSTIN, Texas -- Federal Reserve Chairman Ben Bernanke said on Monday that the nation's economic weakness will persist for some time, even if the government's efforts to boost lending help restore the credit markets to normal.

The economy "will probably remain weak for a time," even if the credit crisis eases, Bernanke said Monday in a speech in Austin. While the Fed can't push interest rates below zero, "the second arrow in the Federal Reserve's quiver -- the provision of liquidity -- remains effective," he said.

Bernanke's comments pushed Treasury yields to record lows. Bernanke has created more than $2 trillion of emergency lending programs in the past year, using the Fed's balance sheet and money-creation authority to cushion the economy from the worst financial crisis in seven decades. The central bank may lower its benchmark interest rate to zero, economists said.

"Although further reductions from the current federal funds rate target of 1 percent are certainly feasible, at this point the scope for using conventional interest-rate policies to support the economy is obviously limited," Bernanke said in remarks to the Austin Chamber of Commerce.

One option is for the Fed to buy "longer-term Treasury or agency securities on the open market in substantial quantities," Bernanke said. "This approach might influence the yields on these securities, thus helping to spur aggregate demand."

Still, many economists expect the Fed to cut interest rates again when it meets Dec. 15-16.

"While (the Fed) could lower rates a little bit more, the fact is that if we have to do more, most of it is going to come in the form of something other than just straight interest rate cuts," said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Conn.

"Bernanke is a policy activist, and you could see that today in the discussion of all the policy options that he thinks are still available," said Brian Sack, Washington-based senior economist at Macroeconomic Advisers LLC. He predicts the Fed will lower its main interest rate to zero next month.

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LeNature's plundered for $500 million: lawsuit

2008-12-02T11:06:00.011-08:00

Gregory Podlucky looted LeNature's of more than $500 million with the help of investment bankers, family, friends and former company officers, according to a civil lawsuit filed in U.S. District Court in Pittsburgh.

The allegations are contained in a 126-page racketeering lawsuit filed under seal in October by attorney Marc Kirschner who is charged with recovering the money owed to investors when LeNature's Inc. of Latrobe was forced into bankruptcy in 2006. The case was unsealed in November.

The lawsuit is the latest and most significant in a series of lawsuits filed in the LeNature's case.

In addition to Podlucky, the lawsuit names as defendants his brother, Jonathan, who was LeNature's chief operating officer; friends, Andrew Murin, a consultant; Donald and Paul Pollinger of Charlotte, N.C., who operate Pollinger Inc.; former LeNature's vice president Robert Lynn of Ligonier; former chief financial officer David Getzik of Washington, Pa., Charlotte-based Wachovia Corp. and two subsidiaries; and several finance companies and equipment manufacturers.

Attorney Thomas Ceraso, who represents Podlucky, declined to comment as did Getzik. A spokeswoman for Wachovia did not respond to a request for comment. Murin did not respond to a request for comment. Jonathan Podlucky and Lynn could not be reached for comment. Donald Pollinger said "I'm aware of it, but I don't wish to make any comment."

Kirschner accused Podlucky of an "outrageous scheme" to spend tens of millions of dollars in financing to build a lavish mansion in Ligonier, purchase expensive gems and jewelry that he hid in a secret room at the Latrobe plant, and toy trains. Podlucky is accused of transferring money to himself, his wife, Karla, and son, Jesse.

Kirschner said Podlucky and the other defendants conspired to "skim" money from the defunct beverage company through extensive loans that LeNature's could never repay, according to the allegations. He likened the plan to a Ponzi scheme "of constantly raising new money and incurring ever increasing debts to refinance investors, thereby cultivating the illusion that a legitimate profit-making business existed."

LeNature's kept operating through a "steady stream of unnecessary, unwarranted and avoidable borrowings" that "propped up the operations of LeNature's" when the company was failing.

Wachovia helped LeNature's with $600 million in loans and junk-bond financing. Wachovia later ran into its own financial problems over the slumping housing market and subsequent economic tailspin and is being acquired by Wells Fargo & Co.

Investigators discovered that Podlucky obtained financing for equipment leases that were inflated or he never obtained, it is claimed. He used forged documents to dupe finance companies into returning millions of dollars to him that are unaccounted for, according to allegations.

In one example, Kirschner said Podlucky and Getzik claimed to have $147 million in deposits in a bank account that doesn't exist, the suit maintains.

Podlucky was able to pull off the scheme, Kirschner alleges, with the help of Wachovia whose own analysts raised "numerous red flags" about LeNature's sales figures, according to the lawsuit.

In 2005, Podlucky claimed to have had net sales of $275 million when the actual figure was only $48.9 million, according to Kirschner.

"Despite having this knowledge, Wachovia did nothing, and moved aggressively to issue more debt and provide more needless capital to an enterprise that could not sustain itself."

By 2003, Wachovia was worried enough about LeNature's finances that it hired its own accountants to conduct a review of LeNature's but the investigation was stymied by Podlucky's lack of cooperation and his refusal to provide the necessary financial records.

When accountants pressed Podlucky for financial information, he simply told them that records were "not available" or that he was on vacation and didn't want to be disturbed. His behavior was "becoming hostile, bizarre, defensive and secretive," as the pressure on him for answers increased, according to the suit.

While the company was foundering, Podlucky wanted to build plants in Germany and Scotland even though his facilities in Latrobe and Phoenix were not operating at full capacity because his products were not selling.

Kirschner raised questions about $160 million in equipment deposits that were paid to Pollinger Inc. Pollinger was a two-man business operating out of a house in North Carolina, according to the suit.

Podlucky claimed he deposited the money with Pollinger who confirmed it held the money when the company did not, according to the filing. Podlucky pulled off the scam, according to Kirschner, by forging statements for a Merrill Lynch bank account that were sent to Pollinger so they matched the actual closing end-of-month statements on Podlucky's bogus account.

While the civil lawsuit progresses, Podlucky, his brother, Lynn, and Murin are under investigation by the U.S. Attorney's Office in Pittsburgh for money laundering, bank, wire and mail fraud.

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GM jobs bank on chopping block

2008-12-02T11:06:00.009-08:00

When General Motors Corp. closes its metal stamping plant in West Mifflin on Dec. 12, Jeff Hall of West Newton is hoping there still will be a jobs bank program to provide income for its laid-off autoworkers.

But, the controversial program that was designed to ensure a trained work force would be available when the Big Three automakers increased production after a downturn, may be on the chopping block as the Big Three automakers plead their case to Congress today for $25 billion in government loans to remain afloat.

"This deal with Congress scares me," said Hall, 56, who is the financial secretary for the United Auto Workers Local 544, which represents about 100 workers who will lose their jobs when the plant closes. Hall, a maintenance man, said he is part of a skeleton crew that will continue working for a few months to maintain the plant.

About a dozen of the GM workers at West Mifflin are in a jobs bank program, said Rick Mismas, shop chairman of UAW Local 544, which represents about 100 workers at the plant. The workers stay at home, rather than report to an office, Mismas said.

Union officials said they didn't know the identities of those in the local jobs bank or declined to name them.

"I think the days of the long-term jobs bank is over," said Mismas, who plans to retire on Jan. 1.

The United Auto Workers union and GM, Chrysler LLC and Ford Motor Co. were negotiating the past week over possibly eliminating the program as a cost-cutting concession to win congressional approval of the $25 billion bailout. Congressional leaders told executives of the Big Three to present a plan for how they will survive. Congress showed little support for loaning money to automakers paying workers in jobs banks that increase labor costs in the auto industry.

Hall said he and about 80 other senior employees might be eligible for the jobs bank program, because the plant shutdown is due to a reduction in volume. But, nothing is certain, Hall said.

Under the jobs bank program, autoworkers who have exhausted their state and federal jobless benefits, and any company-paid supplemental unemployment benefits, will be paid about 85 percent of their regular wages for 48 weeks, said Kristin Dziczek, director of the Center for Automotive Research's program for autoworker labor and education in Ann Arbor, Mich.

The program, which began in the 1980s as a response to the lifetime job security offered by Japanese automakers, was designed to provide laid-off autoworkers job training, alternate work at the plant or work in the community as the company increased productivity, Dziczek said.

But the automakers weren't administering the program properly to ensure productive work was being done by the unemployed, Dziczek said. Workers were being paid to stay home or sit idle at an office because management was too busy running the plant.

"It's turned out to be an embarrassment to all sides," Dziczek said.

The downturn in the auto industry appears to have closed another employment option for the West Mifflin autoworkers -- transferring to a job at GM's Lordstown, Ohio, auto assembly and metal stamping plant. About 50 of the autoworkers at West Mifflin transferred to Lordstown, but it is unlikely any more will work there because 1,100 jobs will be cut at Lordstown next year, Mismas said.

In addition to the hourly workers, the plant closing will eliminate the jobs of salaried workers, about 24 of whom still were on the payroll as of mid-November, GM spokesman Chris Lee said yesterday.

Production at the plant, which opened in 1950, ceased on Nov. 20, Lee said, and workers have been shipping inventory since then. GM plans to hold an auction on Jan. 15 to sell any remaining equipment, Lee said.

"I was hoping to retire as a GM employee," with 30 years of service and a full pension with the company, "but everything went belly up," Hall said.

Shoppers hold back

2008-12-02T11:06:00.007-08:00

NEW YORK -- Deep discounts on everything from sweaters to TVs drove shoppers out of hibernation for the Thanksgiving weekend, but the buying was tempered and sales for the traditional start of the holiday season appear at best in line with stores' dismal predictions.

The sales receipts, however, came at the expense of profits, and merchants are facing a big challenge exciting financially strapped shoppers for the rest of the season, expected to be the weakest in decades.

The nation's retailers -- who since mid-September have suffered from the most dramatic falloff in spending in decades amid a ballooning financial crisis -- opened their stores as early as midnight on Thursday, holding their breath wondering if shoppers would show up for the pre-dawn specials. But while the crowds did come out, analysts say they were thinner than last year, and according to some accounts, business fell off sharply for the remainder of the weekend.

Shoppers were focused on bargains and smaller-ticket, practical items such as blenders and video games, as they worry about layoffs, tightening credit and shrinking retirement funds.

Even online spending, once a bright spot in retailing, has been hit hard by economic woes in recent months. ComScore, an Internet research company, reported Sunday that online spending was up a modest 2 percent for the combined Thanksgiving Day and Friday, compared with the year-ago period.

"I've cut my budget in half. I usually have a spending limit of $50 per person, but this year, it's $25," said Laura Bentley of Miami, who was at the local Dolphin Mall on Saturday, her first day of holiday shopping.

Manno and Poun Sam of Houston, who had just purchased some toys, including a Crayola coloring game and a stuffed animal, at a Wal-Mart store in suburban Houston on Saturday, said they were trying to stay within a $500 budget.

"We're not buying anything fancy," said Manno Sam, an assembly-line worker. "We can't afford it."

New York-based retail consultant Walter Loeb said he expects sales for the weekend to be below year-ago levels, based on discussions this weekend with key executives from discounters and department stores.

But he added, "It wasn't as bad as some feared. ... People were buying but they bought cheap, and the results were not as good."

Marshal Cohen, chief industry analyst at NPD Group, a market research group, who had a network of analysts at 53 mall locations across the country this weekend, said that "the holiday started off with some promise but quickly moved to concern."

"It could have been a disaster, but it wasn't," he said, noting that he estimates that the weekend's sales were at best even with the same holiday weekend a year ago.

Karen MacDonald, a spokeswoman at Taubman Centers Inc., which operates 24 malls in 11 states, said that based on a sampling of malls, business on Friday was anywhere from unchanged to up mid-single digits. But on Saturday, sales were unchanged to down slightly.

"Friday was encouraging, but Saturday wasn't as good as we hoped," she said.

Aside from the economy, however, Black Friday's early morning madness has also lost some of its steam because of the abundance of bargains that shoppers can find on the Web. Cohen also noted there's less frenzy this year because, with the exception of some isolated hard-to-find hits such as Fisher-Price's Elmo Live and Nintendo's "Wii Fit" exercise game, there isn't a particular gift that's a "big standout."

While Black Friday isn't a predictor of the holiday season, it acts as a barometer of consumers' willingness to spend. Complicating matters is a shorter buying season -- 27 days between Black Friday and Christmas -- instead of 32 last year, putting more pressure on retailers.

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Investment firm offers to buy Tollgrade Communications

2008-12-02T11:06:00.005-08:00

An Aspinwall investment firm is seeking an answer by late today for its offer to buy Tollgrade Communications Inc. for as much as $79.4 million.

Bradford Capital Partners said in a filing today with the Securities and Exchange Commission that it owns 11.7 percent of Tollgrade's stock, and would pay between $5.50 and $6 a share for all the remaining shares. Harmar-based Tollgrade makes test software and equipment for telecom and cable networks.

The SEC filing includes a letter to CEO Joseph Ferrara, dated Sunday, expressing disappointment that Tollgrade's directors wouldn't discuss a possible acquisition.

Bradford "has the financial resources to acquire Tollgrade and allow it to operate as a privately held enterprise," the letter from Martin J. Calihan, an agent for Bradford, said, adding the firm could take "any and all" steps to allow shareholders to benefit from such as deal.

Tollgrade spokesman Bob Butter had no immediate comment.

Tollgrade's stock was trading today at around $4.80, in a market moving downward. Its share price has dipped by 72 percent in the last five years, and 39 percent so far this year, the letter pointed out.

Based on the company's guidance, Tollgrade is on track to generate revenue of $55 million to $58 million, this year, which is 25 to 29 percent below last year, the letter said.

Still, Tollgrade in late October reported its first profitable quarter in a year, and said it would move forward with a new focus on software service products for the telecommunications industry. The company's board also approved repurchasing up to $15 million in shares.

Investment banking firm Needham & Co. LLC helped Tollgrade with a strategic review earlier this year to chart its future. Ferrara, a former chief executive at Marconi's North American operations, became CEO of the company just over a year ago.

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Flora leaving Green Building Alliance for job in D.C.

2008-12-02T11:06:00.003-08:00

Rebecca L. Flora is leaving her position as executive director of the Green Building Alliance in Pittsburgh to accept a post with the U.S. Green Building Council in Washington, D.C.

Flora, 49, of the South Side, has led the local organization for 11 years, will become senior vice president, education and research for the national council.

Her appointment will be effective Jan. 15.

"To many, Rebecca Flora is synonymous with Green Building Alliance," said Christine Fulton, president of the local alliance's board in announcing her resignation today.

Fulton said Flora has helped the local organization gain "a national reputation as a catalyst, thought leader, and advocate while the Pittsburgh region achieved prominence as a center for green building.

"Her contributions are countless, and GBA's current success is in great part due to Rebecca's vision, expertise, and dedication. She will be missed greatly," Fulton said.

Pittsburgh ranks fifth in the nation for the number of buildings with 24 receiving the Leadership in Energy and Environmental Design (LEED) certification by the national council.

It also ranks 10th in the nation for total square feet in LEED certified buildings, with 2.86 million square feet.

A transition committee has been formed to find a permanent successor, but the board also intends to hire an interim executive director until that search is concluded.

Hired in 1997 as executive director, Flora was the first employee of Green Building Alliance. Until then, the organization operated informally from it's founding in 1993.

The council, which earlier this year moved to the RiverWalk Corporate Centre (for years known as the Terminal Buildings), now has 10 employees.

Flora also served as a board member and the first female chair of the U.S. Green Building Council.

Previously, Flora served as executive director of the South Side Local Development Co..

She also worked at the Urban Redevelopment Authority of Pittsburgh, where she was project manager for development of the Washington's Landing and Pittsburgh Technology Center revitalization projects.

"Rebecca's leadership as executive director of the Green Building Alliance in Pittsburgh makes her uniquely qualified to lead USGBC's far-reaching education program and expanding research initiatives," said Rick Fedrizzi, president, CEO and founding chair, of the national council.

Undaunted, Skyscrapers Reach Higher

West Penn reports loss of nearly $16 million

2008-12-02T11:06:00.001-08:00

The West Penn Allegheny Health System said today it lost nearly $16 million during the three-month period ended Sept. 30.

The hospital system attributed the loss to its adoption of more conservative accounting methods, to undisclosed fees it paid to consultants as a part of a restructuring, and a change in how investments are recorded.

About 300 full-time positions were eliminated during the period, either through attrition or layoffs. The loss compared to a profit of more than $1.5 million during the comparable period a year ago.

Another reason for the loss was a steep decline in investment income, which dropped to $1 million from $7 million during the year-earlier quarter, blamed on adverse stock market conditions.

For the quarter, the parent company of six hospitals recorded a 6.4 percent increase in revenue from patient services, to $386.3 million, while total revenue rose 6.6 percent to $401.5 million. The patient revenue increase was attributed to a 2.9 percent jump in admissions and other factors.

Expenses increased 9.5 percent, to $418.8 million for the quarter.

West Penn Allegheny's restructuring, under the guidance of CEO Dr. Christopher Olivia, as of mid-November, resulted in more than $53 million savings, the health system said.

The three-month loss comes less than a month after the health care system, which includes the remnants of the former Allegheny Health Education and Research Foundation, reported a net loss of $62.8 million for the year ended June 30, largely due to a $73 million accounting mistake disclosed earlier in the year.

The mistake prompted investment rating agencies to downgrade West Penn Allegheny's credit rating. Documents show the mistake was uncovered after a special accounting review of the system's balance sheet. The review identified $67 million of adjustments related to accounts receivable -- or payments from patients and vendors -- and $6 million of other adjustments.

The $67 million in accounts receivable adjustments was broken down as follows: $5.4 million in fiscal year 2007; $13.1 million in fiscal year 2006; and an adjustment of $48.5 million for "differences between estimated collection rates and actual collection rates."

The Securities and Exchange Commission is reviewing the accounting mistake.

In addition to the Western Pennsylvania Hospital in Bloomfield and Allegheny General Hospital on the North Side, West Penn Allegheny Health System includes Alle-Kiski Medical Center in Natrona Heights, Canonsburg Hospital in Washington County, West Penn Hospital-Forbes Regional campus in Monroeville and AGH-Suburban campus in Bellevue.

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Offers erode for land rich in resources

2008-11-30T05:36:00.001-08:00

The bottom has dropped out of sale and leasing offers to property owners sitting above huge deposits of natural gas in Western Pennsylvania, industry officials and experts say.

The lucrative offers have become more scarce as the credit crunch, weak economy, falling energy prices and concerns over environmental regulations have teamed to deflate some of the interest by companies that have flocked here to drill.

"Lease 'bonus' rates -- what a property owner is paid up front for an oil or gas drilling lease -- have clearly softened over the last three or four months," said Robert Belesky, vice president of business development at CNX Gas Corp., a Robinson-based gas exploration, development and production company.

"Last summer, we saw bonuses of $3,000 per acre and higher in Southwest Pennsylvania. Today, the market is less than $1,000 per acre," he said.

Through September, CNX had acquired leases for about 24,000 acres in the Pittsburgh area, mostly in Washington and Greene counties. That brought its total holdings in the booming Marcellus Shale region -- an underground natural gas formation that underlays two-thirds of the state -- to about 185,000 acres.

Some estimates have placed recoverable natural gas from the entire Marcellus region in portions of four states at 400 trillion cubic feet, enough gas to handle all of America's natural gas needs for more than 14 years.

Deals to buy or lease mineral rights haven't disappeared altogether. CNX and other natural gas developers and drillers are still looking for more leasing rights, even if offers aren't as high as they once were, Belskey said.

"Upfront leasing rates have declined from the thousands of dollars to the hundreds, mostly because of the credit crisis and the decline in energy prices," agreed Matt Pitzarella, a spokesman for Range Resources Corp. of Fort Worth, Texas.

Natural gas prices have fallen by half since reaching a high in the spring of more than $12 per 1,000 cubic feet, with natural gas for January delivery now priced at $6.45 per mcf.

Range Resources has been one of the most active players in Marcellus region in Western Pennsylvania, with more than 900,000 acres leased, primarily in Washington County, since it first entered the market in 2004. It opened a regional office in Canonsburg early this year.

With cash from existing wells down considerably, some companies are having difficulty finding revenues to secure new leases and even pay promised payments on existing leases, Pitzarella said.

"Natural gas prices are down around 50 percent in the last several months, so your amount of cash flow is even less. So you have to be more selective, and that is what we are doing," he said.

Scott York, broker and owner of York Realty in South Strabane, Washington County, said "Because of the current credit crunch, some companies have reigned back or curtailed their activities ... exploring is not paying off as much."

Until the recent pullbacks, York had seen several instances of energy companies purchasing land for premium prices in Washington County.

"In Prosperity, a 74-acre farm, listed for sale at $235,000, was purchased by CNX Gas for $300,000," York said. That was $4,054 an acre and 27.6 percent over the listing price.

In Amwell, a 31-acre site, listed for $135,000, was purchased by T&F Exploration Co. for about $170,000, or $5,500 an acre, he said. That was 25.9 percent above the listing price.

The recent lull in offers doesn't mean activity has ceased altogether, York said.

Recently, he listed a 64-acre farm in south Greene County for sale, and it has attracted 40 interested buyers. He expects the minimum sales price to be $95,000, with free gas to the owner.

Officials in Washington, Greene, Fayette and Westmoreland counties said they can't yet estimate how much overall property values have increased, or may increase, because of gas drilling activities within their borders.

A countywide reassessment of properties would be needed for an accurate reading, said John Frazier, Greene County chief assessor. "However, after talking with people, I believe that land values have increased because of the drilling."

If conditions were the same today, Exco-North Coast Energy Inc., based in Akron, Ohio, would not have spent $2 million to purchase 480 acres ($4,166 an acre) in Fairfield, Westmoreland County, said Wendy Straatman, the company's president.

According to county recorder of deeds, the assessed value of the property today is only $202,960.

"We would not pay that much today for the same property," Straatman said.

The company hasn't started any wells on the site, but there are no plans at this time to re-sell the property, Straatman said.

Farm land often has been a target for gas exploration companies. The general trend by oil and gas exploration companies is to lease the land, not buy, said Mark O'Neill, spokesman for the Pennsylvania Farm Bureau.

Among those benefiting are Bill Doney and his wife, Donna, two retired school teachers who own two farms in South Huntingdon, Westmoreland County.

About four years ago, he signed a drilling lease, but since then, the amount he recieves for drilling rights has more than doubled, Doney said.

"Recently, I signed with Atlas Energy Resources," he said. He now receives royalties on production of "12.5 percent per cubic foot of gas from the wells." There are nine shallow wells and three deeper wells drilled on his property.

Bill Jackson of Redstone, Fayette County, said he agreed several years ago to an 8 percent royalty deal for drilling on 800 acres of his Jackson Farm property. Since then, he signed a new drilling agreement with Atlas Energy that will pay 12.5 percent royalties from gas produced on his land. Several shallow wells are producing on his land and this spring, he expects three deeper wells to be started.

Some municipalities and governmental bodies have sought to cash in on the state's gas drilling boom, but with mixed results.

In October, the Allegheny County Airport Authority was surprised when it received no bids from companies vying to drill for natural gas on airport property, even though 10 companies had expressed interest.

The authority's Sept. 9 request for proposals sought $4.5 million in minimum royalties during the first 18 months of the lease and ongoing royalties of 25 percent on gas produced on the 9,300 acres under the airport in Findlay.

CNX Gas gave the county a letter citing changing market conditions as a reason for not making a bid.

Ebensburg, in Cambria County, had better luck and could be the recipient of $2.6 million from GFI Oil & Gas, a Williamsport company that has obtained the rights to drill on 1,300 acres of borough property for gas, said Daniel Penatzer, borough manager.

GFI has until Dec. 29, 2008, to provide the up-front payment of $2.62 million before drilling can begin, he said.

The five-year lease calls for 15 percent royalty payments on gas extracted from the wells, Penatzer said.

O'Neill agrees with York that the national economy has either slowed down or stopped companies from initiating new leases. Expectations are that once the economy picks up, so will the leasing activity.

According to the latest figures from the state Department of Environmental Protection, it has issued 518 drilling permits for gas wells in the state in 2008, and there have been 277 wells actually drilled.

That includes 317 permits issued and 194 wells drilled in the Pittsburgh region.

Washington County has the most activity, with 137 permits and 98 wells drilled, followed by Fayette County with 68 permits and 34 wells drilled; Green County, with 47 permits and 22 wells, and Westmoreland County with 41 permits and 17 wells.

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$31B to put U.K. in charge of Citizens Bank

2008-11-29T17:26:00.007-08:00

Royal Bank of Scotland Group Plc will sell the British government almost $31 billion of stock and a majority stake, putting the parent of Citizens Bank in the United States, under control of the U.K. government in that nation's biggest bailout.

Citizens' 128 branches in Western Pennsylvania are the second-most in this region, behind only National City Bank's 158. Citizens' share of local consumer deposits -- at 8 percent -- are the fourth-highest share of any bank doing business here.

"It's business as usual," said Mike Jones, spokesman for Citizens, one of the 10 largest banks in the U.S. "We're lending, and will continue to serve the needs of our customers."

The Scottish bank owns Citizens Financial Group, the parent of Citizens Bank of Pennsylvania. Citizens Financial created the Pennsylvania bank from its 2001 acquisition of the former Mellon Financial Corp.'s retail bank franchise.

Last month, RBS' newly named CEO Stephen Hester told analysts that the Scottish bank would "make material changes to strategy." But analysts did not think Hester would sell Citizens Financial because it contributed 13 percent of RBS' pre-tax profit last year.

Friday, RBS investors decided to buy 56 million shares of the bank's stock under a recapitalization plan, the Edinburgh-based bank said in a statement. The government will buy remaining shares offered by RBS, giving it a 58 percent stake, and also purchase preferred stock.

RBS, Lloyds TSB Group Plc and HBOS Plc agreed to sell of stock under Prime Minister Gordon Brown's plan to shore up capital in the British banking system. While RBS investors approved the bailout, most declined to buy shares. Brown wants to increase lending to small business and homebuyers to counteract the worst recession for 17 years and return RBS to private ownership as soon as possible.

"It's a difficult balancing act," said Simon Willis, a London-based analyst at NCB Stockbrokers Ltd. who has an "accumulate" rating on RBS. "The government has got to maintain lending to stop a downward spiral in the economy, but that may contradict the best interests of profit for banks."

RBS, Britain's second-biggest bank before it lost 86 percent of market value this year. It may post its first annual loss in 40 years as bad loans increase, the company said this month. The bank has posted more than $10.8 billion of credit losses this year and probably will take more writedowns in the fourth quarter, CEO Hester said earlier this month.

Hester's predecessor Fred Goodwin used leveraged loans, securities trading and $90 billion of acquisitions to turn RBS into one of the biggest banks in the world during eight years as CEO. His $18.6 billion acquisition of ABN Amro Holding NV last year, part of the world's biggest banking takeover, triggered a third of the bank's first-half writedowns and eroded capital.

Citizens Bank parent taken over by British government

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Trib 30's 1.1 percent gain in November worst in 4 years

2008-11-29T17:26:00.005-08:00

The Trib 30 index of local stocks pulled out of a two-month dive in November -- but barely.

The index ended the month Friday at 174 -- a mere 1.1 percent gain over its dismal finish of 172.1 at the end of October -- the Trib 30's worst performance in more than four years.

Industrial stocks took the worst beating in November, as ugly economic news continued to pour in. Two-thirds of the Trib 30 stocks that hit new, 52-week lows during the month were industrial stocks.

While the local index gained a little ground in November, twice as many stocks (20) fell as those that rose (10).

The Trib 30 is an equal-weighted index of stocks of companies located or dominant in Western Pennsylvania. An investor who divided $100,000 equally among the 30 stocks on Dec. 31, 1999 had a portfolio worth $174,000 at the end of trading yesterday.

Local stocks, however, compared well with the Dow Jones industrial average. The Dow list of 30 stocks ended November by closing at 8,829 yesterday -- 5.3 percent lower than its close of 9,325 at the end of October.

No stocks in the Trib 30 reached new highs last month.

Twelve local issues dropped to new, 52-week lows in November. Three of them -- all metals-related -- established their third new low marks in as many months.

Aluminum giant Alcoa fell to a new low of $6.80 during November, less than one-third its low mark of $20.93 set in September. Allegheny Technologies, which mainly produces stainless steel, fell to $15 last month. U.S. Steel plunged to $20.71, also less than one-third its low mark two months ago.

PNC Financial was the lone financial stock to sink to a new low ($39.09). The bank, which agreed Oct. 24 to buy troubled National City Corp., issued 93 million shares last week in connection with the deal.

The other industrials to set new lows, all for the second time in two months, were: High-tech tool and materials maker Kennametal ($12.82); food processor H.J. Heinz ($36.83); marker maker Matthews International ($32.30); safety equipment maker Mine Safety Appliances ($18.86); coatings, glass and chemicals maker PPG Industries ($35.94); scientific instrument maker Thermo Fisher Scientific ($26.65); and electrical and industrial supplier Wesco International ($11).

In addition, clothing retailer American Eagle Outfitter declined to $6.98 in November.

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Auction scheduled for closed White Oak dealership

2008-11-29T17:26:00.003-08:00

An auction will be held on Dec. 6 of all equipment -- both automotive and administrative -- at the closed John Naretto Buick dealership in White Oak.

"Our goal is to sell everything in the three-story building at 2900 Jacks Run Road, and leave an empty building," said Mark Ferry of Mark Ferry Auctioneers.

If he is successful, he believes the sale could generate $100,000.

No decision has been made on what to do with items not sold at the auction, Ferry said. Not included in the auction is the building and land.

"Everything, from computers to automotive lifts will be auctioned, starting at 9 a.m. on Dec. 6," he said.

John Naretto Buick closed Sept. 30 after 29 years, said Joe Naretto, who oversaw the repair of cars. All the spare parts, normality sold by the dealership, have been returned to General Motors, he said.

This marks the second auto dealership in the area to hold an auction of all equipment.

On May 17, an auction was held at the closed Don Allen City Center in Bloomfield, after the dealership was closed and the property sold to make way for a $240 million mixed-used complex consisting of a hotel, offices, retail, and residential development.

John Naretto Buick to close Sept. 30

Libya terror settlement check deposits refused

2008-11-29T17:26:00.001-08:00

An attorney for family members in Southeastern Pennsylvania and New York related to four victims of Pan Am Flight 103 claims Bank of America refused to accept $7.7 million in compensation checks this week.

"This is a lot of money," said Washington attorney Mark Zaid on Friday. "But how am I supposed to disburse this settlement money if I can't deposit it in the bank?"

Zaid said Charlotte, N.C.-based Bank of America, the nation's largest commercial bank, has not explained to him why it refused to take the deposits.

Spokesmen for Bank of America could not be reached for comment yesterday.

The bombing of Pan Am Flight 103 by Libyan terrorists killed 259 passengers and crew members, including 189 Americans, over Lockerbie, Scotland, on Dec. 21, 1988. The victims included four people from Westmoreland County.

Libyan leader Moammar Gadhafi agreed in 2003 to pay a total of $2.7 billion to the families of those killed. About $2.1 billion has been disbursed. The money was transferred to the U.S. government, which selected JPMorgan Chase as the financial trustee.

Each victim's family received an average of $10 million, paid in three installments, said Zaid. An average of about $4 million was paid in 2003, $4 million in 2004, and nearly $2 million this month.

"I've been on this case for 15 years, and doing settlements for almost five years," said Zaid. For instance, he deposited about $16 million of Pan Am flight victim compensation into Citibank accounts in 2003 and 2004.

On Monday, the attorney tried to deposit four checks -- each for $1,932,500 -- into his trust account at Bank of America. From that account he expected to disburse the money to the four family members entitled to the compensation. Acting with power of attorney, Zaid customarily should have been able to make those deposits.

Zaid tried to contact several Bank of America officials -- all the way up to CEO Kenneth Lewis -- to push through the deposits. But he was stymied by red tape or simply the bank's failure to respond.

Given the Bank of America roadblock, the attorney later persuaded JPMorgan Chase to wire-transfer the funds directly into his clients' respective bank accounts.

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Region's businesses hurt by automakers' misery

2008-11-28T15:15:00.005-08:00

Pittsburgh is not Detroit, but big trouble at the Big Three automakers has scores of local companies on edge.

That's because many Western Pennsylvania businesses rely on the auto industry -- from car dealers to financiers to parts makers and other suppliers.

"There's probably tens of thousands of people in Western Pennsylvania whose jobs are dependent on the auto industry," said Lester Lave, economics professor at Carnegie Mellon University's Tepper School of Business.

The 200 or so auto dealers in the six-county region account for about 8,000 jobs, said Bud Smail, director of the National Auto Dealers Association of Western Pennsylvania and president of Bud Smail Auto Group, Greensburg.

The average dealer in Pennsylvania last year sold about $22.8 million worth of vehicles, according to the association. So dealers in Western Pennsylvania accounted for about $4.56 billion in vehicle sales that year. Their average payroll is about $1.62 million.

The U.S. auto industry, which employs about 2.5 million people, sold 16 million vehicles last year. The industry is on track this year to sell fewer than 12 million, "a significant drop," said Lave.

General Motors, Ford Motor and Chrysler executives sought $25 billion in relief last week from Congress. But lawmakers rejected it, telling the Big Three to design a better turnaround plan and come back Tuesday.

"I can't imagine they will have a plausible plan by then," said Lave. He opposes a taxpayer bailout, and believes bankruptcy would be a better long-term solution.

But a recent NADA survey said 80 percent of consumers would not buy a vehicle from a bankrupt automaker, said Smail.

"The customer wants to know whether (Detroit) would honor the warranty and purchase the parts," he said.

George Benson, owner of New Benson Lincoln Mercury in Whitehall, said sales for the past three months are down about 50 percent from a year ago because consumers are "very conservative right now." He has adjusted by cutting costs, such as eliminating a wholesale parts department and hiring part-time, instead of full-time employees.

Bill Gray Jr., president of two Volvo and Buick/Pontiac/GMC dealerships in Dormont, said sales are down almost 25 percent from a year ago. But his car-service volume is up because people are keeping their cars longer.

"We're trading sales dollars for service and parts dollars," said Gray.

Notaries and title transfer companies sense the auto industry's woes too, said Eddie Altvater, owner of Altvater's Auto Sales, a used-vehicle dealer in Robinson.

"We do a lot of off-the-street notaries, and that's down at least 30 percent from last year," said Altvater. His title work for large trucks is down a similar amount.

Area manufacturers are feeling Detroit's pain somewhat, too.

About 14 percent of the flat-rolled steel from U.S. Steel Corp. plants for the past three years went to the auto and transportation industry, said spokeswoman Erin DiPietro.

But the downturn in the economy led U.S. Steel to lay off 78 workers between the Edgar Thomson and Irvin plants Nov. 19, said DiPietro, to "stay in line with customer demand." The plants employ 1,650.

Likewise, PPG Industries has adjusted to the economic slide, including the auto industry. PPG makes coatings for vehicles from plants around the world, although none locally.

It owns 40 percent of local auto glass maker Pittsburgh Glass Works. The company produces vehicle windshields, and side and rear windows for both Detroit and the replacement glass market from plants in Tipton, Blair County; Meadville, Crawford County; and Creighton, its headquarters. The company declined to release financial data.

PPG will close a coatings plant in Ontario next year and cut 150 jobs to "help us mirror the fundamental shifts in the automotive industry," said Vice President Dennis Kovalsky.

Allegheny Technologies Inc., which operates eight stainless steel plants in the Pittsburgh region, sold 9 percent of its global output to the world's automaking industry, said spokesman Dan Greenfield.

"A lot of what we do does come out of Western Pennsylvania," said Greenfield. His company sells to parts suppliers such components as stainless steel gaskets and turbo chargers for diesel engines.

Similarly, about 8 percent, or $2.5 billion worth, of Alcoa Inc.'s output went to the auto industry last year, said spokesman Kevin Lowery. That includes such products as flat-rolled aluminum for hoods, doors and trunks.

Financiers such as local credit unions are affected by Detroit's downturn.

Allegent Community Federal Credit Union, Downtown, stimulated demand last month by discounting auto loans 1 percent and giving away global positioning systems.

"But excluding that, it's been fairly slow" since early fall, said CEO Kevin Anglemyer.

"We're seeing a little bit of a slowdown, which has something to do with the economy," said Vince Setnar executive vice president of Moon-based Clearview Federal Credit Union, the region's largest.

But drivers need to insure their vehicles, old or new, said Vanessa Paris, spokeswoman for Erie Insurance Group, Erie. It had 1.7 million auto policies in effect last month, and "has not seen a decline" in volume, she said.

"Pricing for coverage is so steady that people aren't driven to shop as much as they might be otherwise," said Paris.

Automakers Rev Up for a Bailout, Too

Consumers opt to fix vehicles, not replace them

Penn Brewing brass hope to find new home

2008-11-28T15:15:00.003-08:00

Trouble is brewing at Penn Brewing in the North Side.

The historic E&O Brewery renovated two decades ago in Troy Hill for Penn Brewing with a combination of taxpayer grants, low interest loans and private capital might dry up because of a lease dispute.

The new owners of Penn Brewing, which makes craft beers and operates a German-style pub, say they cannot afford to pay the new rent sought by E&O Partners. The ownership group, which started life as a public-private partnership, renovated the abandoned 1848 facility in the late 1980s for brewer Tom Pastorius of Sewickley.

A spokesman for Penn Brewing said the partnership wants to increase the rent by 360 percent.

David J. Malone, president and CEO of Gateway Financial, is the president of DLB Management Inc., the general partner of E&O Partners. He calls the brewery a "labor of love."

"This project has been very, very difficult. We completed it in the late 1980s and we've yet to make a penny profit in all that time. We had to restructure the debt, we had to put more cash in it. ... It's nice the brewery has been there all that time, but we can't keep subsidizing the private sector," said Malone, who also serves as chairman of the Pittsburgh Chamber of Commerce.

Pastorius launched Pennsylvania's first craft brewery and brew pub with an array of gleaming copper vats amid the old brick, exposed beams and polished maple tables. Today, the brewery's roster of beer is an established Pittsburgh brand and the brewpub continues to serve up brats and beer.

When Birchmere Capital bought a controlling interest in Penn Brewing from Pastorius five years ago, the principals of the Pittsburgh-based private equity fund hoped to continue operations on the slopes of Troy Hill.

Those assumptions changed when Len Caric, who was named Penn Brewing President and CEO in July, went to negotiate a new lease.

"I was surprised. It was shocking. We had no indication anything like this would happen," Caric said.

So, the company is making plans to have its beer produced at least temporarily in Wilkes Barre while looking for a new Pittsburgh home after its lease expires in February.

"We've talked with the Urban Redevelopment Authority and a number of real estate agents have contacted us. They're all anxious to help us," Caric said.

"This is a Pittsburgh tradition. It's a Pittsburgh brand. We're optimistic and confident we'll land where we need to land and stay here," he said.

Malone said he was surprised to read of Penn Brewing's search for a new location in the newspaper.

"We gave them an offer. They thought it was too high," Malone said, adding the company declined to disclose its financial statements as conditions to continue negotiations.

"We certainly wish them well. It's a Pittsburgh institution and we'd like to see it survive and prosper."

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Holiday shoppers leaving the plastic at home

2008-11-28T15:15:00.001-08:00

Shoppers say they're charging fewer holiday purchases this year, citing worries about the economy and job security, rising interest rates on credit cards and higher prices for gifts.

"Last year, I did a lot of shopping with my credit card," said Brandy Murray of the North Side. "This year I didn't use my credit card at all."

Instead, she's using cash to buy presents for family members and a godchild. Although that means buying fewer gifts, this year, she said, "people are mostly worried about what is necessary."

As the Christmas shopping season officially kicks off today, consumers nationwide appear reluctant to load hundreds of dollars in gift purchases onto credit card bills that come due in January.

Those who plan to use credit most often for holiday purchases are falling in number, to 31.5 percent this year compared with 32.3 percent in 2007, the National Retail Federation found in its annual survey. "We are really advising people more than ever not to use credit cards," said Kristen Garrett of South Side-based Advantage Credit Counseling. "And people are aware, more than usual, of the pitfalls."

Partly that's because banks and merchants are raising interest rates on cards, lowering credit lines and shortening payment cycles. Credit.com found rates on some cards rose from 12 or 15 percent to as high as 29 percent, said Gerri Detweiler, a credit expert and adviser for the San Francisco-based Web site, a clearinghouse of information and products.

Bank cards spark the most complaints. Large financial institutions are most concerned about maintaining their profit margins given the bad real estate loans they might carry, she said. Credit union cards fluctuate less, as do department store cards -- though their interest rates tend to be higher.

Consumers need to watch for other changes. "If you charge a bunch and then your limit is lowered, you run the risk of being maxed out on that card," Garrett said, adding that using more than 30 percent of a revolving credit line can damage credit scores.

Kelly Nicholls started holiday shopping this summer and put all her gifts on layaway -- an old option a few major retailers are offering again. Shoppers can be charged $5 to $10, or a percentage of the total purchase price, to pay for items in installments and get them later.

"I don't like to use plastic. It gets you in trouble," said Nicholls, of North Braddock, a single mother with two children.

Cookie Yoder, president of the Pittsburgh Federal Credit Union in Mt. Oliver, said members are withdrawing what they can to spend on gifts with the intention of limiting their spending to those amounts.

They're also saving more. The small credit union's deposits have increased by $750,000 since September, to $7.7 million, she said. That figure accounts for the $91,000 Pittsburgh Federal paid out to members with Christmas club accounts, another old idea regaining popularity with credit unions and some banks.

Though interest rates are small -- Pittsburgh Federal Credit Union pays 0.2 percent -- the idea is to let customers build a stash by setting aside a little money each month for year-end shopping.

"We think they're a great idea," Garrett said, and Advantage's January newsletter will encourage clients to start Christmas clubs for next year's shopping.

This year, shoppers who have little cash put aside should make budgets, compare prices on the Internet before heading to the mall and avoid crowded stores that can cause stress and lead to impulse purchases, she said.

Still, Consumer Reports said 26 percent of shoppers planned to be out today, up 5 percent from last year.

Although many consumers expect to pay their balance in full next month, avoiding finance fees, some will fall behind as other bills appear and jobs are lost or overtime pay is cut, Garrett said.

"If you are carrying a balance, you may want to find ways to cut back or pay cash," Detweiler said. "But if you pay in full, then using your credit card is the safest way to pay."

Jo Ciao of Swissvale is watching sales and clipping coupons. She'll pay for gifts with credit cards but plans to pay off the entire bill when it's due. "I've never paid a penny in interest. I don't believe in that," she said.

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CMU-Pitt official moving to development nonprofit

2008-11-27T13:50:00.007-08:00

Donald F. Smith, director for economic development for Carnegie Mellon University and the University of Pittsburgh, is leaving that post become the new president of the Regional Industrial Development Corp. of Southwestern Pennsylvania.

Smith, 44, of Shadyside in early January will succeed Robert Stephenson, a former commercial real estate executive who is retiring after heading the RIDC since 2003.

Smith will become the fifth person to head the 53-year-old RIDC, one of the region's best known economic development organizations.

Founded in 1955, the private, nonprofit corporation started with development of hundreds of acres in campus-like suburban industrial parks and later turned its efforts to spearheading redevelopment of older industrial sites, including in McKeesport, Duquesne, East Pittsburgh and Pittsburgh.

Based at the Regional Enterprise Tower, Downtown, the organization, with a staff of 19, continues to work to foster economic development, owning or operating 10 industrial parks in nine area counties.

The RIDC's role has evolved over the years, starting with development of three large suburban industrial parks -- in O'Hara northeast of the city, in the Cranberry-Warrendale area to the northwest, and in the Parkway West corridor. Those parks are home to several hundred companies.

The corporation stepped forward to take a chance on redeveloping a number of former industrial sites, including at the closed Westinghouse Electric Corp. East Pittsburgh plant, where it operates the Keystone Commons industrial park, and at former U.S. Steel Corp. mill sites in Duquesne and McKeesport.

Stephenson of Upper St. Clair spent most of his career in the private real estate industry, including with the Edward J. DeBartolo Corp.

In 2003, he left his post as president of the Strategic Investment Fund -- a $70 million private investment fund that supports area development projects -- to succeed Frank Brooks Robinson Sr., who had headed the RIDC for 22 years.

"Bob Stephenson has done a terrific job," said Smith. "I hope to tap his expertise and experience as I transition into this new role. It will be hard to leave the universities, but I'm excited. I think we have the opportunity to do some really good things for the community."

Smith has been involved with numerous economic development initiatives since joining CMU as a professor and director of the school's Center for Economic Development in 1995. He's held the joint economic development post at Pitt and CMU, known as the University Partnership of Pittsburgh, since 2002.

"Don has done a great job in serving both universities in the economic arena," said Reynolds Clark, vice chancellor at Pitt.

"Both universities are going to miss him very much, but from the RIDC's standpoint, we're very excited about Don's willingness to come on board to be our new president," said Clark, who will serve as acting chairman of RIDC's board until a permanent successor to Smith is named.

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Mortgage market warms up

2008-11-27T13:50:00.005-08:00

Mortgage rates fell and telephones started ranging at mortgage providers across Western Pennsylvania Wednesday after the Federal Reserve's move to buy $600 billion in debt and free up credit markets.

Word of the new program on Tuesday sent rates down nearly a full percentage point, to around 5.5 percent on a 30-year, fixed-rate loan, from 6.38 percent earlier in the day. Yesterday, the 30-year, fixed-rate loan bobbed around the 5.8 percent mark.

"Loan activity and interest in loans certainly flared after the Fed's announcement," said Keith Gumbinger, spokesman for HSH Associates, Financial Publishers, a Pompton Plains, N.J., company which tracks loan rates. "No doubt many borrowers have been waiting for rates to hit a certain point, with either their loans in process or nearly complete."

The lower rates are expected to impact purchases and refinancings, experts said. Many lenders said it was welcome to have phones ringing.

"Actually, we had probably four to five times the number of daily calls than we've had daily during the last couple weeks," said Jim Carroll, vice president at Dollar Savings Bank in Pittsburgh, yesterday. "And this is the day before Thanksgiving."

"Everyone hopes this announcement helps break the ice on mortgage lending," Carroll said. "Right now, it's a question of customer confidence."

The Fed pledged to spend $500 billion to buy mortgage securities backed by secondary lenders Fannie Mae and Freddie Mac, along with securities backed by Ginnie Mae, which guarantees investors payments on securities backed primarily by Federal Housing Administration-insured loans. The Federal Reserve agreed to purchase $100 billion of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

The low rates aren't for everyone looking to refinance a mortgage or purchase a home. Given the mortgage meltdown, which continues to negatively impact the nation's economy, banks aren't willing to lend to anyone.

"I would say that for the best rate, an applicant would have to have a credit score better than 740, and probably have 20 percent down," said Brad McLean, vice president with West Penn Financial Services in Pittsburgh.

"The best prices are available to the best of the best applicants," Gumbinger agreed. Higher down payments or equity in a property will be needed in markets that have suffered the most, Gumbinger added. Ten percent down could be adequate in some areas.

"And since the Fed said it's going to be buying up Ginnie Mae mortgage-backed securities, that includes FHA loans, and those can be 3-1/2 percent down," Gumbinger said.

The big question is, will the rate dip hold, or will it be just another decrease, followed by a similar increase, which has been the trend in the mortgage markets for months.

"If you ask me, 'Should these rates stick?,' they should," McLean said. "If you ask 'Will they stick?' I don't know. Will this help get things moving? It should."

Gumbinger said this week's rate drop came after the Federal Reserve outlined its new program. Once details and a timetable are finalized, low rates could continue.

"We think that rates for now are likely to stabilize now in the 5.5 percent to 6.2 percent range," Gumbinger said.

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Title insurers' deal may affect area jobs

2008-11-27T13:50:00.003-08:00

Bankrupt LandAmerica Financial Group Inc.'s plan announced Wednesday to sell three subsidiaries to Fidelity National Financial Inc. might lead to job reductions in Western Pennsylvania -- where both employ 1,400 -- at least until the real estate market rebounds, said one local expert.

Both companies have local operations that perform some of the same functions.

"Over time, Fidelity could meld the two together," said Jeff Schurman, executive director of the industry trade group Title Appraisal Vendor Management Association in Moon.

LandAmerica, which owns the third-largest group of title insurers in the United States, filed for Chapter 11 bankruptcy yesterday in Richmond, Va., where it is headquartered.

Fidelity, under an agreement worked out this week, will buy Lawyers Title Insurance and United Capital Title Insurance for $139.4 million. And one of its title insurance underwriters, Chicago Title Insurance Co., will buy another LandAmerica subsidiary, Commonwealth Land Title Insurance, for $158.6 million.

The deal was announced five days after Jacksonville, Fla.-based Fidelity scrapped a plan to acquire all of LandAmerica for $130 million.

LandAmerica CEO Theodore L. Chandler Jr. said yesterday that the bankruptcy filing and sale "offers our stakeholders the best result available in this brutal real estate, credit and capital market environment." The two units making the acquisitions will assume $195 million in LandAmerica liabilities.

Here are details of LandAmerica Financial Group's and Fidelity National Financial's local presence:

LandAmerica has a Nationwide Appraisal & Title Services business in Washington, Pa., and a smaller Lenders Services unit in Moon.

Together, they employ 420 workers, spokeswoman Lloyd Osgood of LandAmerica said, adding she didn't know how many Pittsburgh-area workers were in the three subsidiaries sold.

Fidelity National Financial, the nation's second-biggest title insurer, has a Service Link business with 500 employees in Moon and in Hopewell as well as an LSI unit with another 500 workers in Coraopolis. Representatives couldn't be reached for comment yesterday.

Title insurers use their databases and public records to verify a seller is the home's true owner and that the property is free from liens.

LandAmerica reported losses in four consecutive quarters, and its bankruptcy petition lists $3.3 billion in assets and debt totaling $2.9 billion. The company blamed the filing on the "significant decline in mortgage financing."

Among the top four title insurers, Fidelity National Financial alone made a profit last year. But the company is shrinking payroll and said this fall it might cut about 10 percent of the jobs in its main business, or about 900 positions, by the end of the year.

LandAmerica stock plunged 88 percent Monday after the original deal with Fidelity crumbled, LandAmerica closed yesterday at 20 cents, down 71 cents. Fidelity shares ended the day at $12.38, up $2.19.

Schurman said LandAmerica and Fidelity operations here both perform title and closing services -- all "back-office stuff" that is critical, yet time-consuming, and that Fidelity could look to eliminate duplication.

When home sales become more robust, "they will be bringing people back on. This is all cyclical, depending on what the mortgage industry is doing," he said.

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State residents will spend less this holiday season

2008-11-27T13:50:00.001-08:00

HARRISBURG -- Seven of 10 Pennsylvanians don't expect their personal finances to improve in 2009, and more than half say they'll spend less money on holiday gifts, according to a poll released Wednesday by Quinnipiac University.

The poll of 1,487 Pennsylvania residents found that 54 percent consider themselves worse off financially, while 23 percent say they are better off and 22 percent say they are the same.

Conducted from Nov. 19-24, the poll has a margin of error of plus or minus 2.5 percentage points.

"There is a lot of financial pain in Pennsylvania today," said Clay Richards, assistant director of Quinnipiac's polling institute. "More than half the people say they are worse off financially than they were a year ago, and seven out of 10 don't expect things to get better in the next year."

The poll found that three-fourths of people with private retirement plans say they've lost money. Richards noted that one-third of those with retirement savings plans plan to delay their retirements.

More bad news for retailers, Richards said, came from the answers to a question about holiday gift purchases: "This year, are you going to spend more on holiday gifts, less or about the same?" Only 3 percent said they would spend more; 53 percent said they plan to spend less, and 43 percent said about the same. Two percent didn't know.

The poll found that 62 percent of Pennsylvanians expect the national economy to improve in President-elect Barack Obama's first term.

By a 42-38 percent margin, Pennsylvanians approved of how Gov. Ed Rendell is handling the state's economy. State government faces up to a $2 billion deficit next year. Twenty percent were unsure about Rendell's fiscal management.

But in Southwest Pennsylvania, 51 percent disapproved of Rendell's handling of the economy. That region includes Beaver, Westmoreland, Washington, Indiana, Cambria, Greene, Fayette and Somerset counties.

In Allegheny County, those polled were more optimistic than the rest of the state about their personal finances. Only 4 percent listed their personal finances as "poor," compared to 15 percent statewide.

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Lenders OK $107.5M for Dick's Sporting Goods

2008-11-26T13:42:00.011-08:00

Despite the credit crunch, a group of local banks is lending $107.5 million to help build Dick's Sporting Goods Inc.'s new headquarters in Findlay.

Washington County developer Horizon Properties Group LLC announced the funding Tuesday.

First Commonwealth Bank of Indiana, Pa., led the group, along with Ameriserv Financial, First United Bank, S&T Bank, Tri-State Capital Bank, Parkvale Savings Bank, WesBanco Bank and the ERECT Fund, a union-supported pension fund.

"The accomplishment of finalizing this project's finances at a time when the markets have come to complete standstill is a testament to the bank group's vision and support of economic development in our region," said Horizon Properties CEO Rodney L. Piatt.

"In a difficult economic environment, First Commonwealth is in a strong period of growth," said Chief Financial Officer Ed Lipkus. "We have financed many projects in 2008 and are well-capitalized to continue to look at viable opportunities such as the one we've just completed with Dick's Sporting Goods."

The project will put a 730,000-square-foot complex on 116 acres in Findlay. Now under construction, it is expected to be completed by January 2010.

Dick's employs about 950 at its headquarters in Findlay, and the project is expected to add about 700 jobs over the next five years.

Ultimately, the site could be expanded to 1 million and possibly 2 million square feet of space, with a total of almost 2,000 jobs.

A spokesman for Dick's could not be reached for comment.

"This is huge for us," said Dennis Davin, Allegheny County director of development. "From our standpoint, this kind of project validates that we still have a lot of business to do and things are happening right now despite what's happening in the national economy."

The Dick's project will be at Northfield, a development site owned by the Allegheny County Airport Authority.

The county's Redevelopment Authority earlier this year requested $7.25 million in state funding for roads and sewers for the project. In addition, a 10-year, 50 percent tax abatement was approved by the county and local governments.

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Amid economic downturn, bright spots for jobs

2008-11-26T13:42:00.009-08:00

Despite the economic gloom, there are bright spots out there where companies are hiring, and John Hanigan found one of them.

Those bright spots for jobs include health care, education, coal mining, energy-related manufacturing, and wholesale and retail trade in Western Pennsylvania, say local employers, staffing firms and career experts.

In fact, 27 percent of employers responding to Manpower Inc.'s employment outlook survey for Western Pennsylvania said they intended to hire in the last three months of the year, said Kelly M. Scott, regional director for Manpower in Robinson. Only 10 percent said they expected to cut jobs.

Hanigan was looking to change companies this summer, before he landed at Elliott Co. in Jeannette in August. Elliott makes industrial turbines for the oil, natural gas and chemical industries, a field Hanigan has worked in for nearly 30 years.

"I was making a career change and was looking for more of a team environment. Elliott Co. has a lot to offer -- the wages and benefits and work environment. There's a good quality of life in the area," said Hanigan, who was hired as director of operations.

Elliott is bucking an economic trend. Rather than laying off workers, the company has added about 225 jobs -- including manufacturing and engineering positions -- in its U.S. facilities as well as worldwide operations since last year, said spokesman Brian Lapp.

Other sectors that are hiring locally include information technology and health care workers dealing directly with patient care, said Larry Puhalla, a supervisor at the PA CareerLink office in Forest Hills.

"We're seeing a lot of 'helpdesk jobs,'" Puhalla said, referring to jobs requiring an information technology specialist to resolve problems with computers and software. "That hasn't really dropped."

The health care sector remains a strong jobs generator, despite the University of Pittsburgh Medical Center laying off 500 employees last month. Those employees whose jobs were eliminated were not involved in direct patient care, Puhalla said.

UPMC still is increasing its work force by hiring more people than it fired this year, adding 6,187 this year, compared to 5,680 in 2007, said UPMC spokesman Frank Raczkiewicz.

At PA CareerLink in Youngwood, 156 of 254 current job openings are connected with manufacturing, warehousing, assembling, transportation, construction and clerical, said administrator Anthony Gebicki.

"We're still in there with manufacturing," Gebicki said, including the coal and natural gas industries.

Consol Energy Inc. in Cecil, Washington County, which operates 20 coal mines, hired 1,000 employees in both 2007 and 2008, and it expects to continue that trend for the next few years, spokesman Thomas Hoffman said. The bulk of those new employees -- coal miners and engineers -- will work for Consol's operations in Southwest Pennsylvania and northern West Virginia, he said.

Most of the hiring is being done to replace employees who are retiring, Hoffman said. The average age of Consol employees is in the early 50s, and many likely will retire in the next four to five years, he said.

Any job associated with manufacturing, mail houses and packing of merchandise for wholesale and retail trade during the holiday shopping season is also doing well, Manpower's Scott said.

While the nation lost 1.2 million jobs in the first 10 months of the year, according to the Bureau of Labor Statistics, nonfarm jobs in the seven-county Pittsburgh region increased by 28 percent in the first nine months of the year, the state figures show.

"We don't grow as fast (as other regions), but when it (economy) goes sour, it doesn't go as quickly as the rest of the country," said Frank Gamrat, senior research associate for the Allegheny Institute for Public Policy, a think tank in Castle Shannon.

While no sector is immune to recession, health care and education are among the Pittsburgh region's stronger sectors, Gamrat said.

"They will be more stable than the financial sector," even though PNC Financial Services Group, Bank of New York Mellon and Dollar Bank are not in the same dire straits as other banks, Gamrat said. BNY Mellon, however, recently announced it would cut 1,800 employees nationwide.

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Bayer to pay $97.5 million to settle kickback probe

2008-11-26T13:42:00.007-08:00

WASHINGTON -- German medical conglomerate Bayer will pay $97.5 million to settle U.S. government allegations that it paid kickbacks to medical suppliers to boost sales of its diabetes products.

The Justice Department said today that the settlement resolves an investigation into whether Bayer bribed 11 diabetic suppliers into switching patients to its products from competitors.

Tarrytown, N.Y.-based Bayer Healthcare makes electronic monitors and testing strips used to measure blood sugar levels. Bayer did not admit or deny any wrongdoing in the case, and a spokeswoman said the company is "satisfied that the issues in question have been resolved."

Justice Department officials said Bayer paid Liberty Medical Supply Inc., one of the largest diabetic suppliers, about $2.5 million to convert patients to Bayer supplies between 1998 and 2002.

Liberty Medical is known for its heavy-rotation television advertising, which features character actor Wilford Brimley. The Port St. Lucie , Fla.-based company did not immediately return calls for comment Tuesday afternoon.

The Justice Department also alleged Bayer paid $375,000 in kickbacks to 10 other diabetes equipment companies. A government spokesman said the settlement does not include any penalties against the suppliers.

All 11 companies provided equipment to patients enrolled in Medicare, the government's health care plan for seniors. The settlement resolves false claims filed by suppliers between 1998 through 2007.

"If medical device manufacturers want to serve Medicare beneficiaries they must follow the law," said Gregory Katsas, an assistance attorney general with the Justice Department. "Paying health care suppliers to place a particular brand of device with Medicare beneficiaries violates the law and will not be tolerated."

Under the settlement, Bayer agreed to a corporate integrity agreement which requires it to review and update its policies for working with Medicare.

"For a period of years now we've already had programs in place to assure compliance," said Bayer spokeswoman Susan Yarin. "So these actions will be in addition to what we're doing already."

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Hackers work with patience, cunning

2008-11-26T13:42:00.005-08:00

SAN JOSE, Calif. -- Internet criminals have been getting more "professional" for years, trying to run their businesses like Big Business to get better and more profitable at selling stolen data online. Now the bad guys of the cyber-underworld are exhibiting other unexpected traits: remarkable patience and restraint in stalking their victims.

A report by antivirus software vendor Symantec Corp. details a startling trend that highlights the inventive ways criminals are figuring out ways to make money online.

Hackers are sometimes breaking into online businesses and not stealing anything. Gone are the bull-in-the-China-shop days of plundering everything in sight once they've found a sliver of a security hole.

Instead of swiping all the customer data they can get their hands on, a small subset of hackers have concerned themselves with stealing only a specific thing from the vendors they breach -- they want access to the compromised companies' payment-processing systems, and nothing else, according to the "Symantec Report on the Underground Economy," released Monday.

Those systems allow the bad guys to check whether credit card numbers being hawked on underground chat rooms are valid, the same way the store verifies whether to accept a card payment or not.

It's a service the crooks sell to other fraudsters who don't trust that the stolen card numbers they're buying from someone else will work, and it's good business.

The bad guys hardly touch anything. The customer data for that store's clientele remains intact. They don't install malicious software that turns the compromised machines into spam-spewing robots.

"They treat these things fairly pristinely so they can maintain access," Alfred Huger, vice president for Symantec Security Response, said.

According to Symantec, in the company's yearlong look at 135 so-called "underground economy servers" -- public servers hosting mostly legitimate chat channels, with a few bad ones catering to cyber crooks -- researchers determined that criminals have latched on to this tactic as a way to make money and self-police the underground.

The Cupertino-based company's researchers were only able to determine the trend is happening by looking at thousands of credit card numbers being checked every day -- and accepted or rejected -- by shadowy groups online promoting that service and charging a fee. That fee is about $10 per card checked. Considering they're typically checked in batches of 10 or more, the revenue can add up fast.

Researchers said that the high number of cards the groups were checking each day suggests that they had long-term access to a few compromised vendors, or had a lot of compromised vendors under their control and would shift the credit-card-checking chores to different ones to avoid being detected.

Huger said the reason the criminals don't raid the victim companies' databases is it's much lower risk to check the card numbers on someone else's computers, rather than to start taking stuff out, which gets noticed.

The report mostly underscores the trend that online criminals are adding more touches of professionalism to their businesses, such as bundling packages of exploits together and selling them, or offering up programmers -- like a company would hire a consultant -- to write malicious code for other people.

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Stock of spurned LandAmerica plummets 88 percent

2008-11-26T13:42:00.003-08:00

Shares of LandAmerica Financial Group. Inc., the nation's third largest title insurance and settlement company, tumbled more than 88 percent Monday in the wake of a terminated $130 million merger plan.

The Richmond, Va.-based company's share price dropped on the first day of trading since Fidelity National Financial Inc. of Jacksonville, Fla., canceled its plan to acquire LandAmerica, which employs about 500 in Western Pennsylvania,

LandAmerica's stocks closed at 51 cents, down $3.83, or 88.25 percent.

Fidelity's shares rose 13 percent, gaining 96 cents to close at $8.35. It also has operations in the Pittsburgh area, employing about 1,000 here.

The merger agreement, announced Nov. 7, was subject to completion of a financial review. Fidelity National had until Nov. 21 to make a final decision and announced its decision to pull out late Friday.

Fidelity National, the No. 2 title insurer, said it canceled plans to buy LandAmerica "pursuant to its contractual due diligence right."

Together, they employ about 26,500 people nationwide, including their estimated 1,500 workers in Allegheny, Beaver and Washington counties.

"Based on what was reported, this doesn't sound good for LandAmerica," said Jeff Schurman, executive director of Title Appraisal Vendor Management Association, a title industry trade group in Moon. "Fidelity had an opportunity to look at their books and found something they didn't like."

Officials of the two companies could not be reached for comment.

LandAmerica CEO Theodore L. Chandler Jr. said in a statement: "We are disappointed with Fidelity's decision. However, our attention remains focused on strengthening LandAmerica's business and exploring strategic alternatives during these incredibly difficult economic times."

LandAmerica said earlier this month it was forced to sell to Fidelity after losses from the decline in housing sales jeopardized its independence. LandAmerica posted four straight quarterly losses.

Fitch Ratings yesterday lowered its ratings on LandAmerica's financial strength three notches to BB from BBB+, moving the company from "secure" to "vulnerable." LandAmerica "faces serious liquidity constraints now that the acquisition plans have fallen through," Fitch wrote.

Chicago Title, a subsidiary of Fidelity National, was going to set up a $30 million credit facility to make sure LandAmerica had access to enough short-term cash. That's not going to happen now.

Without a new acquisition agreement, some $250 million of borrowed money would be due immediately, Fitch said. LandAmerica can't access the $50 million remaining under its bank line of credit, the rating agency added.

Fidelity National's Service Link unit, with offices in Hopewell, Beaver County, and in Moon, together employ well over 500. Its LSI unit in Coraopolis employs about 500.

LandAmerica's Nationwide Appraisal & Title Services in Washington, Pa., employs about 400, and its Lenders Services unit in Moon employs about 100.

The nation's top three title insurers, including First American Corp. in Santa Ana, Calif., cut more than 12,000 jobs from the beginning of 2007 to the middle of this year as sales declined, reducing demand for coverage. Title insurers use their databases and public records to verify that a seller is the home's true owner and the property is free from liens.

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Taxpayers on hook for $7.7 trillion

2008-11-26T13:42:00.001-08:00

To rescue the financial system, the government has committed more than $7.7 trillion on behalf of American taxpayers -- or half the value of everything produced in the nation last year.

In the biggest response to an economic emergency since the New Deal of the 1930s, the Federal Reserve has committed $4.75 trillion; the Federal Deposit Insurance Corp., $1.55 trillion; the Treasury Department, $947 billion; and the Federal Housing Administration, $300 billion, according to data compiled by Bloomberg. The remaining pledge, as much as $200 billion to bolster Fannie Mae and Freddie Mac, hasn't been allocated to any agency.

Including more than $300 billion earmarked for Citigroup Inc. on Sunday, financial institutions have tapped $3.17 trillion of the funds, according to data compiled by Bloomberg. Federal Reserve lending last week was 1,900 times the weekly average for the three years before August 2007, when the credit markets seized up.

When Congress approved Treasury's $700 billion Troubled Asset Relief Program on Oct. 3, Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, regulators are committing far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return.

"Whether it's lending or spending, it's tax dollars that are going out the window, and we end up holding collateral we don't know anything about," said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. "The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones."

Bloomberg News tabulated data from the Fed, Treasury and FDIC, and interviewed regulatory officials, economists and academic researchers to gauge the extent of the government's rescue effort. Bloomberg, which has requested details of Fed lending under the Freedom of Information Act, filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral. Collateral is an asset pledged to a lender in the event a loan payment isn't made.

"Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting," Bernanke said Nov. 18 to the House Financial Services Committee. "We think that's counterproductive."

The $7.76 trillion includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.

William Poole, former president of the Federal Reserve Bank of St. Louis, said the two programs are unlikely to lose money. The bigger risk comes from rescuing companies perceived as "too big to fail," he said.

The government committed $29 billion to help engineer the March takeover of Bear Stearns Cos. by New York-based JPMorgan Chase & Co., and $122.8 billion (in addition to TARP allocations) to bail out New York-based American International Group Inc., once the world's largest insurer. Most recently, Citigroup received $306 billion of government guarantees for troubled mortgages and toxic assets. The Treasury also will inject $20 billion into the bank after its stock fell 60 percent last week.

"No question there is some credit risk there," Poole said.

The worst financial crisis in two generations has erased $23 trillion, or 38 percent, of the value of the world's companies and brought down three of the biggest Wall Street firms. Regulators hope the rescue will contain the damage and keep banks providing the credit that is the lifeblood of the economy.

The money that's been pledged is equivalent to $24,000 for every man, woman and child in the country. It's nine times what the United States has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half of the country's mortgages.

"It's unprecedented," said Bob Eisenbeis, chief monetary economist at Vineland, N.J.-based Cumberland Advisors Inc. and an economist for the Atlanta Fed for 10 years until January. "The backlash has begun already. Congress is taking a lot of hits from their constituents because they got snookered on the TARP big time. There's a lot of supposedly smart people who look to be totally incompetent, and it's all going to fall on the taxpayer."

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